THE TOKENIZATION OF THE
ST. REGIS ASPEN RESORT
Tokenization is the process of breaking down traditional asset classes into smaller shares onto the blockchain, similarly to how shares of a public company represent fractional ownership in the company. In doing so, many traditional asset classes have a lot to gain from the efficiencies provided by digitization and fractionalization.
Tokenization is a blockchain-backed process of turning someone’s equitable interest in any asset class into digitized tokens. Through tokenization, asset classes such as real estate have a solution to many of their current problems including liquidity issues, high capital requirements for investors and complicated middleman processes currently making investing difficult. Moving these processes to the blockchain increases efficiency and transparency allowing for developers to ease their current equity raising processes. As we will get into during the case study of the St. Regis Aspen Resort, tokenizing an asset also solves the problem of liquidity by having a secondary market for the trading of security tokens to allow for investors to trade their tokens with other members on the platform similar to how a public entity is traded on the stock market. This resolves a long-lasting issue in the world of real estate, as current structures lock an investor in for a given number of years, preventing them from liquidating their investment without taking a huge loss. Not only that, but it will eliminate a huge barrier to entry by lowering the minimum investment requirement, allowing for investors to make a smaller contribution at their own comfort. Tokenized assets allow for this thanks to the efficiencies of the blockchain giving the developer the ability to not have to perform all the marketing and due diligence they currently do into each individual investor. Rather, it would be done seamlessly through the blockchain. This alongside automating processes and cutting out middlemen processes make tokenization the future of asset-backed investments, and why MarketSpace Capital intends to be a leader in this space.
Case Study: St. Regis Aspen Resort
Let’s take a closer look at an actual real-life example of tokenization in action. The property currently known as The Aspen was originally built as the Ritz-Carlton hotel in Aspen, Colorado. In 1998, the property was sold to Starwood as part of its acquisition of ITT Sheraton and converted to the St. Regis brand, and in 2005, the property was divided into two separate units: the 179-key St. Regis Aspen Resort, including 25 luxury suites, and the St. Regis Residence Club Aspen.
In 2010, Elevated Returns, a full-service real estate firm focused on value-add opportunities worldwide with an asset pipeline in excess of $1 billion, purchased the St. Regis Aspen Resort for $70 million from Starwood Hotels and entered a long-term management contract. The firm implemented a large-scale renovation plan worth $50 million targeting outdoor areas, meeting rooms, and amenities. Between 2013 and 2019, EBITDA increased 138% from $6.9 million to $16.4 million indicating the large success of these improvements and the overall profitability of the project.
The Tokenization of St. Regis Aspen
While Elevated Returns considered listing the property as a REIT on the NYSE, they instead committed to a digital offering of the resort. The digital security was sold through a Reg D 506(c) to accredited investors in 2018. On August 24th, 2020, the entity Aspen Digital, representing equity within the St. Regis Aspen Resort, joined the tZERO ATS, an alternative trading system in which digital securities and other assets are transacted on a secondary trading market. Aspen Digital represents approximately 19% of the total equity ownership of the resort.
On its first day of being listed, the St. Regis resort (ASPD) was traded at a volume of 138,000 and saw a substantial 32% price increase.
Performance After Listing
On its first day of being listed, the St. Regis resort (ASPD) was traded at a volume of 138,000 and saw a substantial 32% price increase (initially each token represented a $1 share, by the end of the day was $1.32). Since joining the secondary trading market, the resort has seen monthly trading volumes eclipsing $103,000 and has seen its digital investor base expand from less than a dozen investors to over 500 currently. After entering the market in August, the digital security saw its trading volumes in shares and monetary value steadily increase representing consistent demand for the equity. It can be deducted that much of this growth in investors has been achieved due to increased investor access and liquidity. The investment is not restricted by high capital requirements or to accredited investors like traditional real estate investments.
MarketSpace Capital’s Tokenization Plans
As the trends show a higher demand for crowdfunding in the real estate industry, a decentralized, automated process that is powered by the blockchain is the perfect answer to meet this demand. MarketSpace Capital is interested in a model that would allow for a more streamlined investor experience for our investors. Additionally, by allowing our investors to have more liquidity in their investments, we believe that it will ease investors conscious when making an investment and allows for a backup exit option in unforeseen circumstances in which someone would be required to liquidate their investment. It is our belief that being a leader in this space will give us a competitive advantage over others in the industry as we will offer our investors something that current, traditional fund-raising approach cannot. Other real estate firms are currently raising billions of dollars of capital through Security Token Offerings (STO), and these assets are already trading by other investors. Therefore, there is a market for these offerings, and with the real estate market being worth over $228 trillion in total assets, we are just scratching the surface of what will inevitably be the future of this industry.
MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.
Disclaimer: *For sold properties, actual sales price is reported. For active investments, the Estimated Current Value is based on the Managing Member’s estimate of current value. Recent acquisitions are generally valued at the acquisition price. Values may be internally prepared. This web-page/website is for informational purposes only and is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the “Memorandum”) of any offering of MarketSpace Capital.