GlobeSt.com: Why does it make sense to have a direct-issuance and trading platform for commercial real estate?

Haahr: This is for select types of real estate securities and institutional joint ventures: non-traded REITs, DSTs and joint ventures held in portfolio by institutional investors. These are by nature illiquid once owned. They are not DTTC registered or eligible and therefore cannot be cleared or settled like an equity or corporate bond, for example. As such, they have no real market or mechanism by which they can be traded actively—that is, they are not listed on any exchange.

The result historically is a very inefficient market for buying and selling in the aftermarket—if you can sell at all—which results in a wide bid/ask spread, and the seller usually taking a big discount on re-sale. Buyers are typically opportunistic in nature and looking to take advantage of the lack of a ready market and lack of transparency in these types of real estate assets.

SPM will solve this illiquidity problem by creating a web-based Nano exchange platform to offer and trade these securities and institutional joint-venture pieces. We will achieve this by using technology pioneered by our partner, Fundamental Interactions in New York City. The platform will reshape what has historically been an inefficient network into a dynamic competitive marketplace.

GlobeSt.com: How do you plan to roll out this program to the market, and who is your target customer?

Haahr: The customer base is broad and varied: NTR and DST sponsors (for new issuance and secondary trading), independent broker-dealer networks that have traditionally sole NTR, wire houses now selling NTR product, holders and owners of the NTR and DST securities, institutional owners and investors, as well as traders who want to be involved in the assets. The beauty of SPM is that it is a winning proposition for everyone. Current sponsors of NTRs and DSTs as well as buyers of the product have long fought against the fact that once an investor buys the security, there is no real ability for the investor to get out of the trade—except for some very limited redemption features that are under the control of the sponsor or through an opportunity fund purchase, which occurs at an often-steep discount. So, sponsors will be very enthused about the chance to tell prospective brokers selling their products and their clients that a true secondary market exists should they desire to sell in the future, and the buyer will know they have the ability to sell at a fair, market-determined price.

Institutional investors (pensions/foundations/endowments/opportunity funds) can sell peer-to-peer or to a fund dedicated to acquiring these illiquid pieces, but the process is time consuming, rarely competitive and not transparent. The ability to bring this sale to a broader market in an efficient and transparent way now will significantly decrease the implied cost of the sale and allow the market to set a fair competitive price for the JV piece. Traders can also actively participate in the buying and selling of these assets, benefiting all parties by creating enhanced liquidity and decreasing the discount and spread between the bid and ask.

GlobeSt.com: What effect do you believe this platform will have on the industry?

Haahr: For each of these three segments of the real estate market—NTR, DST and institutional JV—SPM in partnership with FI and its technology will create a trading platform where all participants in the market: (issuers, traders, investors and sellers) can transact in an environment that is efficient, transparent and highly competitive, thereby reducing costs of trade reconciliation and settlement, increasing transparency and ensuring optimal price execution for all parties.

GlobeSt.com: What else should our readers know about this platform?

Haahr: We understand the importance of “ease of use.” SPM will employ a simple web interface that provides access to a sophisticated multi-dealer electronic trading infrastructure where information can be accessed, the history and current market for the real estate security or asset easily understood and trades executed through our customer order matching technology.

|

SAN DIEGO—Non-traded REITS, Delaware Statutory Trusts and joint ventures held in portfolio by institutional investors are illiquid once owned. Silver Portal Markets aims to solve this problem by creating a web-based Nano exchange platform to offer and trade these assets, founder and senior managing principal of Silver Portal Capital Jon Haahr tells GlobeSt.com.

Haahr's firm believes that distributed ledger technology is the way of the future—and even that the future is already here—because of its ability to decrease costs of trade reconciliation and settlement by disintermediating the large institutions in the middle. He says Silver Portal Markets can do this with confidence given the immutability characteristic of blockchain. The firm has partnered with Fundamental Interactions, which he says is two years ahead of the rest of the market in the blockchain arena.

Silver Portal's expertise is in the real estate sector, where its partners have experience in advising and raising more than $20 billion in capital in more than 150 transactions in the public and private real estate capital markets. SPM will be a web-based market, providing both real-time secondary trading and direct issuance for illiquid real estate securities and institutional joint ventures. The market will disintermediate the traditionally inefficient system of sponsors, inter-dealer brokers and RIAs into a more efficient and competitive trading marketplace, using Ethereum smart contracts to provide real-time reconciliation and settlement of trades, thereby greatly reducing time and cost to create a peer-to-peer platform for real estate liquidity.

We spoke with Haahr about why this platform makes sense, who can use it and the effects it will have on the industry.

GlobeSt.com: Why does it make sense to have a direct-issuance and trading platform for commercial real estate?

Haahr: This is for select types of real estate securities and institutional joint ventures: non-traded REITs, DSTs and joint ventures held in portfolio by institutional investors. These are by nature illiquid once owned. They are not DTTC registered or eligible and therefore cannot be cleared or settled like an equity or corporate bond, for example. As such, they have no real market or mechanism by which they can be traded actively—that is, they are not listed on any exchange.

The result historically is a very inefficient market for buying and selling in the aftermarket—if you can sell at all—which results in a wide bid/ask spread, and the seller usually taking a big discount on re-sale. Buyers are typically opportunistic in nature and looking to take advantage of the lack of a ready market and lack of transparency in these types of real estate assets.

SPM will solve this illiquidity problem by creating a web-based Nano exchange platform to offer and trade these securities and institutional joint-venture pieces. We will achieve this by using technology pioneered by our partner, Fundamental Interactions in New York City. The platform will reshape what has historically been an inefficient network into a dynamic competitive marketplace.

GlobeSt.com: How do you plan to roll out this program to the market, and who is your target customer?

Haahr: The customer base is broad and varied: NTR and DST sponsors (for new issuance and secondary trading), independent broker-dealer networks that have traditionally sole NTR, wire houses now selling NTR product, holders and owners of the NTR and DST securities, institutional owners and investors, as well as traders who want to be involved in the assets. The beauty of SPM is that it is a winning proposition for everyone. Current sponsors of NTRs and DSTs as well as buyers of the product have long fought against the fact that once an investor buys the security, there is no real ability for the investor to get out of the trade—except for some very limited redemption features that are under the control of the sponsor or through an opportunity fund purchase, which occurs at an often-steep discount. So, sponsors will be very enthused about the chance to tell prospective brokers selling their products and their clients that a true secondary market exists should they desire to sell in the future, and the buyer will know they have the ability to sell at a fair, market-determined price.

Institutional investors (pensions/foundations/endowments/opportunity funds) can sell peer-to-peer or to a fund dedicated to acquiring these illiquid pieces, but the process is time consuming, rarely competitive and not transparent. The ability to bring this sale to a broader market in an efficient and transparent way now will significantly decrease the implied cost of the sale and allow the market to set a fair competitive price for the JV piece. Traders can also actively participate in the buying and selling of these assets, benefiting all parties by creating enhanced liquidity and decreasing the discount and spread between the bid and ask.

GlobeSt.com: What effect do you believe this platform will have on the industry?

Haahr: For each of these three segments of the real estate market—NTR, DST and institutional JV—SPM in partnership with FI and its technology will create a trading platform where all participants in the market: (issuers, traders, investors and sellers) can transact in an environment that is efficient, transparent and highly competitive, thereby reducing costs of trade reconciliation and settlement, increasing transparency and ensuring optimal price execution for all parties.

GlobeSt.com: What else should our readers know about this platform?

Haahr: We understand the importance of “ease of use.” SPM will employ a simple web interface that provides access to a sophisticated multi-dealer electronic trading infrastructure where information can be accessed, the history and current market for the real estate security or asset easily understood and trades executed through our customer order matching technology.