[SB-BFDC] MIP6 Application: Own (and trade) a Piece of Paradise with this BeachFront Hotel in Phuket, Thailand, managed by Best Western Plus - a SolidBlock offering

BeachFront Digital Coin (BFDC) is a real-estate backed security token representing interest in the Beachfront hotel in Phuket Thailand managed by a well-known and successful Thai property developer, Blue Horizon, under the Best Western Plus brand, and SolidBlock Inc., an internationally recognized pioneer in tokenization and the developer of our fully compliant tokenization platform.

To know further, watch this informative webinar and learn all about how SolidBlock’s platform is becoming the smarter way to make a profit through real estate and how you can make this work for you when investing in the Beachfront project.

1. Who is the interested party for this collateral application?

The interested party for this collateral application is SolidBlock Holdings LLC - BeachFront Digital Series (the Company-Series). Specifically, SolidBlock Inc. has formed the Company-Series (Delaware incorporated) to offer investors the opportunity to participate in real estate and hotel ownership in conjunction with experienced hotel developers and operators.

Main Contacts - SolidBlock: Co-Founder, Co-CEO and CMO, Yael Tamar:[email protected]; SolidBlock Founder and Co-CEO, Yuval Wirzberger: [email protected]

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token

Project - in Brief

SolidBlock is issuing a token representing 25% stake in The Beachfront Project Co., Ltd., a Thai private limited company, which holds 100% ownership of the Beachfront Hotel in Phuket. The Beachfront Project Co., LTD is wholly owned and operated by Blue Horizon Co. Ltd. (the “Developer”). The tokens issued at $1 per token will represent 12,000,000 LP shares which equals 100% membership interest in - SolidBlock Holdings LLC - BeachFront Digital (the Company-Series) , an SPV which will hold the 25% stake of the asset, as delineated above in Section 1.

The Company-Series intends to use the proceeds of the sale of the BFDC’s (after payment of fees and offering expenses ) to purchase an interest in the Best Western PLUS branded sea proximate hotel/condominium known as “Best Western PLUS The Beachfront Rawai”, located at 25 46 หมู่ 5 Wiset Rd, ราไวย์ เมือง Phuket 83130, Thailand and to build up to 96 additional lodging units comprising a mixture of sea facing and mountain view units (This is Stage 4 of the development project, Stages 1-3 are complete, running and debt-free, as delineated in detail below in Section 3 of this application).

The BFDCs are digital tokens on the Ethereum blockchain. The BFDC’s are securities for purposes of U.S. securities laws and they are designed to be compliant with applicable U.S. federal and state securities laws and regulations. BFDCs can be accessed and transferred (when and to the extent permitted under applicable regulations) through the SolidBlock Platform or held directly in a digital wallet.

Fractional ownership/Tokenization of real estate, in general

SolidBlock’s state-of-the-art digital securities platform, which enables fractional ownership of the underlying assets or fractional entitlement to certain rights (revenue or interest) as well as trade of assets via OTC on SolidBlock platform or through partner exchanges.

Real estate asset tokenization is an emerging trend representing the convergence of real estate investing and blockchain technology. Tokenization helps asset or fund owners raise capital more efficiently, and gives investors unprecedented access to private real estate investments, transparency, and liquidity.

SolidBlock was a first mover in the industry with the tokenization of the St. Regis Aspen Ski resort (ASPD trading on tZero).

The Series, as delineated in the previous section, is the official issuer of the unique Beachfront Digital Coin.

Purchases of the BFDCs will be paid in U.S. dollars. The Company-Series accepts Bitcoin (“BTC”), Ethereum (“ETH”) , DASH, or may accept cryptocurrencies as payment for BFDCs.

The funding objective is to raise $12,000,000 USD to purchase 25% of the Best Western PLUS The Beachfront Rawaii in Phuket, Thailand, with the majority of investment indicated for the development of a fourth operational phase with 96 rooms.

The offering price of each BFDC is $1.00 and the minimum investment is $5,000 USD although the Series, in its sole discretion, may determine to lower the minimum amount. BFDCs can be accessed and transferred (when and to the extent permitted under applicable regulations) through the SolidBlock Platform or held directly in a digital wallet. In addition to offering the BFDCs to accredited investors, SolidBlock will be able to offer retail investors access to this opportunity through a crowdfunding platform to be determined.

The Real Estate Asset: With the proceeds from the sale of the BFDCs, the Series will be purchasing an equity stake in the hotel . The funding will be used by the developer to build Phase 4 (2.5 years estimated to completion) which will include 96 additional units with balconies (to add to the existing 190), 1 new 4-floor building, a 2-floor facility building, as well as a restaurant and beach club.

The first three phases of The Beachfront have already been fully completed and the hotel is open and operating. Following the success and popularity of these first phases, we are launching a new phase of The Beachfront Oceanfront Condominium, managed under the Best Western International Brand.The developer, Blue Horizon (BH) owns the land, obtained all requisite permits and licences. There is no debt on this asset or in other words, the asset is unencumbered.

The Best Western PLUS The Beachfront Rawai is set on 3200 sq.m. of direct beachfront in Rawai, Phuket, The Beachfront is a unique project that offers the ultimate investment or residence in prime tropical real estate.

The project is structured as a 25% purchase of the hotel with a fixed income for 10 years and a full principal repayment in Year 10 plus a 10% bonus. The fixed income ranges from 7-10% based on schedule as per the pre-defined schedule. The interest is guaranteed.

Exit Strategy: As discussed above, principal is fully repaid with a 10% premium in Year 10 after which we will be entitled to 25%ownership of the hotel and profit distributions. We will then venture to sell the 25% stake for an additional profit in Year 15.

BFDC Storage and Transparency: BFDCs are held on behalf of investors by SolidBlock in a cold storage wallet, and can be accessed and traded through the SolidBlock Platform. Investors will also have the option to store BFDCs in any ERC-20 compatible wallet. It is also important to understand that because they are stored on the blockchain, investors in BFDCs can view a record of their investment on the SolidBlock Platform. The Company-Series will communicate with Investors through the SolidBlock Platform or via electronic mail as to material developments regarding an investment. Investors can review their account statements online and see that they have received payments on the BFDCs they own.

3. Provide a brief history of the project

The history of the project is embedded in the separate histories of the main two entities behind the Company - Series - Blue Horizon and SolidBlock as well as the opportunity afforded by one of the world’s top tourist destinations - Phuket, Thailand. Blue Horizon reached out to SolidBlock to tokenize their project and assist in raising funds to complete the fourth phase of the hotel. SolidBlock and Blue Horizon entered into a partnership agreement to execute the tokenization project providing the entity structuring, regulatory compliance and technology platform.

The Project Team:

Blue Horizon - An international real estate development company operating in Asia since 2005. Blue Horizon’s portfolio comprises construction projects including institutional, industrial, educational, residential, and multi-family housing, through all project aspects, including project planning, scheduling, quality control and cost and design-build construction. Blue Horizon is known for consistently meeting construction deadlines and budget requirements through project planning, scheduling, quality control and cost management. Blue Horizon (BH) is providing the asset - The Beachfront Hotel - BF - (BH is 100% owner of BF) and the Company-Series is purchasing a 25% stake in BF co LTD and that is owned by BH.

SolidBlock is a smart contract development and management platform for tokenized assets. In other words, SolidBlock transforms real estate, a traditionally illiquid asset into a tradable security through tokenization. Its claim to fame was the Aspen Coin - the first ever tokenized commercial real estate project in the world whereby SolidBlock raised $18M in 4 months for the luxurious St. Regis Ski Resort in Aspen Colorado. The Aspen Coin was listed on tZERO in Sep 2020 (amidst the COVID-19 crisis), traded by over 700 customers with over 4-8% of its market cap traded every month. The issuance price was $1 and the current price stands at about $1.30 (30% premium). The SolidBlock team is hustling, simultaneously, working on diverse tokenization projects for residential, commercial, and hospitality-based properties in the United States, Europe, and Asia. Moreover, SolidBlock prides itself on its efforts to advance and facilitate interoperability and regulatory standardization, thus mitigating barricades to digital markets and investing.

Through the leveraging of these two companies’ wealth of experience, the Beachfront Digital Coin (BFDC) was born. BFDC provides an unprecedented opportunity for savvy investors interested in digital securities backed by one of the safest asset classes, namely real estate located in one of the world’s top tourist destinations - even in the midst of the COVID Pandemic.

Why Phuket? Phuket has the highest number of visitors per square mile per day, than any other tourist destination in the world. The table below shows the ranks of different destinations based on the number of tourists per square mile

Rank Destination Tourists per Square Mile
1 Phuket, Thailand 5,090
2 Palma de Mallorca, Spain 2,918
3 Pattaya, Thailand 2,762
4 Paris, France 1,174
5 Barcelona, Spain 605

There are currently 146 hotels in Phuket and with the increasing number of tourists, this industry realizes a 7.3% year-on-year increase. In 2019, three new shopping malls were opened; Central Patong, Blue Tree Phuket and Porto de Phuket, further enhancing Phuket’s attractiveness as a tourist destination.

Despite the pandemic, Phuket Hotels occupancy rate was 32.5% in the first half of 2020 and it is forecasted that the hotel supply will increase by a further 13.4% by 2023.

Chinese tourists are the largest contributors to Thailand’s tourism industry and receive an average of 5.6 million tourists per year. In the first half of 2020, Phuket received 1.8 million international and domestic passengers.

On average Phuket hotel occupancy rate in the first half of the year (H1) in 2019 was 73.6%. The total tourism receipts in 2019 was THB 46 Billion from domestic tourism and THB 370 Billion from International tourists.

Phuket During and Post- COVID-19

Following the closure of borders, due to the pandemic, Phuket is now preparing to receive its first group of tourists. A group of 120 Scandinavian tourists are due to arrive in Phuket on 1st November.

In Asia’s first international destination recovery initiative post Covid-19, the Global Hospitality branding agency (QUO) are collaborating with the Phuket Hotels Association, to create an aspirational relaunch campaign aimed at reviving travel to Phuket. This campaign will focus on sights, sounds, feelings, tastes and emotions evoked by Phuket and is aimed at attracting both domestic and international travelers to Phuket.

Additionally, Phuket’s hotel sector will be boosted by improved infrastructure, e.g. Phuket International Airport expansion Phase 2 due in early-2021, increasing capacity to 18.5 million passengers per year and Phase 3 by 2023-25, increasing capacity to 25 million passengers per year.; the Phuket Light Rail Transit System by 2024 and the new Andaman International Airport by 2025

4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

Link to the PPM: MakerDAO ppm latest version - Google Drive

Link to the Smart Contract: To be added in comments

5. Link any available audits of the project. Both procedural and smart contract focused audits.

We self-audited the smart contract. The PPM (Private Placement Memorandum) has been prepared and reviewed by our legal team, which includes our in-house counsel Natalie Birenbaum, KARM legal, and Nellis Katz. The BFDC smart contract was built based on the original AspenCoin, which was audited by both EY and KPMG.

6. Link to any active communities relating to your project.

Best Western PLUS The Beachfront website URL (Hotel):

The Beachfront (Project):

BW Plus The Beachtfront Facebook:

Blue Horizon YouTube Channel:

Blue Horizon Instagram:

Asia Pacific Awards Link:

Blue Horizon Press Releases:

Phuket Related Articles:

7. How is the applying collateral type currently used?

The current collateral type uses an asset backed SPV tokenization structure. The asset - 25% equity in the hotel - is placed in a newly formed entity (the Delaware Series LLC) which is tokenized.

8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

The SPV for the project is a United States Delaware Limited Liability Series formed for the purpose of investing in The Beachfront. SolidBlock Inc. a Delaware C-Corp, is the general partner of this SPV and thus, bears general responsibility. The investors will be protected through the use of 3rd party compliance and audit partners, who will be acting as escrow agents on the funds collected - verifying every transaction of the Company-series and the use of funds.

9. Where does exchange for the asset occur?

Exchanges may occur in two distinct ways:

Via peer-to-peer trading tokens over the counter on the SolidBlock platform, following a 1-year lockup for US investors, as per the US regulation.

The tokens will also be listed on the INX exchange and possibly other exchanges and ATSs with appropriate level of licenses with whom SolidBlock works (tZero, Archax, Merj, Atlas.one, Texture Capital, Rialto, ADAX, etc.)

10. (Determined by Legal Domain Team) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.

We have created an official Private Placement Memorandum (PPM) , guided and written by our US US-licensed securities attorney (Sam Katz) and are raising funds under Reg D 506C, Reg S and Reg CF. The project also passed due diligence with North Capital, which is a registered US-based broker-dealer and local due diligence completed by Wintawong & Associates Legal and Translation Services, a local legal firm specializing in Thailand real estate assets.

Contact: Ms. Waraporn Intawong, Attorney-at-Law

Office Address: 66/4 Thepkrasattri Road, Ratsada Sub-District, Phuket City

Tel. 099-4789455 Email: [email protected], [email protected]

11. (Determined by Legal Domain Team) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.

As mentioned above, we are using Reg D 506C, Reg CF, Reg S for which we have filed or will file Form C and Form D with the SEC. We have registered with Edgar. All the subsequent links will be provided in the comments section.

We registered the security with the CUSIP Global Services. Legal Entity Name: SolidBlock Holdings LLC - BeachFrontDigital. The GMEI/LEI registration number will be provided in the comments section.

12. (Optional) List any possible oracle data sources for the proposed Collateral type.

The initial data source is based on the initial valuation presented based on the appraisal provided.

The data source will be the price. In other words, the question we tackle here is price setting mechanism. Initially, there will be an issuance price and thereafter, the price oracle will be the market fee - the price for which people are actually buying and selling. It should be noted that at this point, only the SPV is borrowing against the collateral.

13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type.

We have several accredited investors and groups who may be interested in taking part in liquidation of the collateral in case of default. We will need to develop the list and grow the potential investor base together with Makerdao.

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Thanks for the application.

Can you elaborate on how this token would interact with Maker?

Not sure I have fully understood but the token represents a LP equity of a SPV that has a structured product as an asset. This asset is a combination of a 10-year in fine loan and some warrants to be converted as shares at year 15.

Liquidity seems low so it is hard to onboard as a crypto-collateral (KYC would be an issue as well).

The equity nature of the token and the long maturity/complexity of the underlying asset makes to hard to integrate as a Real World Asset.

Hi @Yael_Tamar , I have some questions

  1. I assume the 25% ownership steers this safely past the Thai rules on foreign investments?
  2. I must admit I have not seen returns mentioned as fixed when they vary in the 7-10% range. You mention a pre-defined schedule - maybe provide a link to this?
  3. Could you provide a payment schedule year 0-16 including any Year 15 asset sale?
  4. Specifically how is interest payments transferred to token holders?
  5. Are the interest and asset sale income in any way taxable in Thailand?
  6. What happens to the tokens after Year 15? Are they somehow deleted or made unvalid?

Hi @SebVentures,

The token has a value associated with the equity in the hotel. There is a guaranteed cash flow for 10 years, and then dividends paid from the equity distribution. We would be interested in collaterizing the asset and leveraging it using defi based on the equity value and a fixed / variable return.

We do expect to have some liquidity on the tokens via exchange partners and internal investors. When we spoke with the maker team last time, we understood there is also a mechanism for auctioning the asset in case of default on the loan and distributing the proceeds to the defi lenders which you guys have gotten a legal opinion that should not violate securities laws.

Hi @Planet_X

1. I assume the 25% ownership steers this safely past the Thai rules on foreign investments?

Yes.

2. I must admit I have not seen returns mentioned as fixed when they vary in the 7-10% range. You mention a pre-defined schedule - maybe provide a link to this?

It’s a fixed return based on the schedule seen here (link to the investment agreement)

\ 306x243

3. Could you provide a payment schedule year 0-16 including any Year 15 asset sale?

Years 0-10 as listed above. After year 10 is based on 25% profit share (free cash distribution). Year 11-15, based on the pro forma projections, estimated expected free cash:

$921,059

$999,280

$1,040,877

$1,084,142

$1,130,223

Final sale / disposition income: $16,146,037

Please note figures do not include management, carried interest or closing costs.

4. Specifically how is interest payments transferred to token holders?

Dividends / distributions can be transferred in USDT or USD to the bank. We may be able to accommodate other methods if needed.

5. Are the interest and asset sale income in any way taxable in Thailand?

Yes, there is withholding tax in Thailand of 10%

6. What happens to the tokens after Year 15? Are they somehow deleted?

The model shows a year 15 exit sale / disposition of the 25%. When the asset is sold there is a final distribution to investors and the tokens are burned.

1 Like