Tykhe Capital Breaks Ground with Hong Kong’s First Real Estate STO: PRINCE Token

By 0xK2 09/11/23 1:21 PM

Tykhe Capital Group, a leading financial services provider, announced today the launch of Hong Kong’s first real estate fund Security Token Offering (STO). The STO, named PRINCE token, is designed to cater to professional investors and aims to raise approximately HK$100 million. The funds raised through this innovative tokenization initiative will be utilized to acquire ownership rights of five connected shops located at Prince Edward Road West, Kowloon.

Reducing Financing Costs and Streamlining Fundraising

Tony Chang, Vice President of Capital Markets and Wealth Management Business at Tykhe Capital Group, emphasized in an interview that STO has the potential to significantly reduce financing costs for property owners and real estate developers. Given the high interest rates associated with traditional bank loan mortgages, which can reach up to 5%, fund tokenization offers a cost-saving alternative, potentially reducing expenses by at least one-third. Compared to traditional fundraising methods like initial public offerings (IPOs) and real estate investment trust fund (REIT) listings, which entail lengthy preparation periods involving investment banks, lawyers, accountants, and more, fund tokenization streamlines the process, shortening the coordination time to just 3 months.

Lowering the Entry Threshold for Investors

One of the key advantages of this initiative is that it lowers the entry threshold for investors. Previously, investing in real estate often required substantial capital, with private real estate funds typically necessitating a minimum investment of US$1 million (approximately HK$7.8 million). With fund tokenization, the entry fee for this project is only HK$1,000, making real estate investment more accessible to a broader range of individuals. Furthermore, once the token is listed on the virtual asset trading platform, it can be traded in the secondary market 24 hours a day, and ownership is securely recorded on blockchain technology, such as Ethereum.

Investor Returns and Future Prospects

Investor returns from the PRINCE token will encompass rental income and future property appreciation. Ronald Leung, Managing Director of the group’s Capital Markets and Wealth Management Business, stated that annual dividends will be distributed to investors based on rental income minus costs. Currently, shops with similar rents in Prince Edward Road offer returns of 2 to 3%. Tenant arrangements will be reevaluated to potentially attract larger merchants, pharmacies, jewelry stores, or cosmetics retailers, capitalizing on the expected benefits of increased cross-border trade between the local and mainland markets. In the third to fifth years following the fund’s launch, the fund manager may sell properties on the open market, with the proceeds, minus costs, distributed to investors.

Addressing Security Concerns

Investing in STOs does come with network security risks. To mitigate these risks, Tony Chang highlighted that once investors sign the subscription agreement, they open an account with their wallet, and tokens are distributed upon successful subscription. In the event of token theft or loss, at the request of the Securities Regulatory Commission, the fund company will provide compensation to investors.

Professional Investors Only

It’s important to note that this fund is exclusively open to professional investors for subscription. Given that the fund focuses on a single property project, its design is not suitable for retail transactions. Ronald Leung acknowledged that retail customers can explore other investment options, such as comprehensive real estate stocks or REITs available on the Hong Kong Stock Exchange. Nevertheless, Tykhe Capital Group is keen to work with the Hong Kong Stock Exchange to develop more products that offer around-the-clock trading and increased investment returns to retail investors.

Looking ahead, Ronald Leung revealed that future projects may be related to artificial intelligence (AI), with innovation and technology companies, particularly those in the catering industry and big data sectors, receiving support from major mainland technology firms. In the context of high interest rates and the post-pandemic economic landscape, STO is positioned as a promising avenue for reducing financing costs for real estate developers and facilitating funding for innovation and technology firms, signaling a promising future for this emerging financial trend.

In conclusion, Tykhe Capital’s launch of Hong Kong’s first real estate fund STO marks a significant step toward modernizing the real estate investment landscape, reducing barriers to entry for investors, and streamlining the fundraising process for property owners and developers. As regulatory approval progresses, the PRINCE token may pave the way for a new era of accessible, efficient, and secure real estate investment in Hong Kong’s vibrant market.

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