Business Monday: Digital tokens, blockchain technology and the St. Regis Aspen
September 2, 2018
As one of Aspen's flagship hotels, the St. Regis Aspen Resort has been the subject of wheeling and dealing for more than 30 years. The latest endeavor, however, involves digital coins instead of cold-hard cash.
In August, New York-based asset manager Elevated Returns announced its plans to sell nearly one-fifth of the 179-room hotel through crowd-funding by using the website Indiegogo to help sell the hotel shares through digital tokens; the goal is to sell $18 million worth of tokens, at a buck apiece, to accredited investors.
The tokens would account for as much as 18.9 percent of equity in St. Regis, with New York-based Elevated Returns, which owns the hotel, holding onto the remaining 81.1 percent.
It would be the latest development for the hotel property whose history dates back to 1986, when developer Mohamed Hadid overcame Donald Trump's push to buy 88 acres at the base of Aspen Mountain by forking over $57 million in a foreclosure sale.
That land was developed, in 1992, into a Ritz-Carlton, and Hadid would eventually sell his half to Saudi Arabian businessman Sheik Abdul Aziz Bin Ibrahim Al Ibrahim. In the summer of 1997, the sheik's Los Angeles partnership that owned the Aspen hotel, as well as ones in Washington, D.C., Houston and New York, was court-ordered to drop the Ritz-Carlton name because it owed $4 million in management fees to the hotel company.
In January 1998, Starwood bought the luxury Aspen hotel and turned it into the St. Regis.
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Fast forward to September 2010, when 315 Dean Associates Inc., represented by investor Stephane De Baets' Bangkok-based OptAsia Capital Co. Ltd., acquired the five-star St. Regis for $70 million. De Baets also controls Elevated Returns, which manages 315 Dean Associates.
DeBaets' latest effort to take the hotel to outside investors comes after his ownership group pulled its $33.5 million initial public offering from the New York Stock Exchange in February. The hotel would have been sold as a single-asset real estate investment trust, with investors having to put down at least $2,000 — at $20 a share — to buy into the hotel. The IPO would have accounted for 49 percent of the hotel.
In DeBaets' latest round to seduce investors to the St. Regis, he's selling digital coins — for the purposes of the St. Regis they are called "Aspen Coins" — that can be purchased with U.S. currency as well as Bitcoin and Ether. The purchases would be recorded on a blockchain (see sidebar).
In an email to De Baets and Indiegogo founder and CEO Slava Rubin, The Aspen Times posed the following questions:
Aspen Times: Can you explain, in layman's terms for our readers, what exactly security tokens on a blockchain are?
Rubin: Security tokens are digital assets that represent equities, debts or dividends which are recorded on a blockchain. Think of these like the digitization of a paper shares or stocks. Today's financial world operates in a world of paper stocks, which has led to a very inefficient market in which banks, payment processors and other middle-men make money by handling our transactions. Using a blockchain, much of this back-office work (and the costs related to it) can be automated through smart contracts and other mechanisms to provide the same value as a paper share, but without nearly as much overhead.
Aspen Times: What makes the St. Regis Aspen an attractive investment through this venture?
De Baets: We believe owning a digital coin in the St. Regis Aspen is a unique and innovative part of the investment. We're constantly adapting towards existing technology and we feel blockchain will maximize real estate's global potential, which we believe is also huge for digital security tokens. Another attraction is that everyone can buy and sell Aspen Digital Coins globally, bringing greater accessibility. We also see a lot of potential in the "crypto world," the crypto fanatics looking for more stable products — like asset-backed coins — to invest in, which will allow new money to flow into real estate.
Aspen Times: Earlier this year, owners of the St. Regis backed off an IPO for the St. Regis. What gives you confidence that the token-approach will be more successful?
De Baets: Time will tell how successful this offering will be, but we believe many people secretly want to own a piece of the St. Regis Aspen hotel. Owning a digital token is the equivalent of owning a share, and is a digital security. We saw that doing an IPO was not scalable through the traditional route. Seeing where the blockchain market was heading, we saw the opportunity to be first-movers with our token offering for the St. Regis Aspen.
Aspen Times: What's the greatest risk with this type of investment?
De Baets: There is risk with any real estate investment, but we don't see any significant risk other than market risk. This is no different than owning a piece of real estate in a private deal. All we're doing here is making a private real estate deal more transparent, accessible and potentially more liquid.
Aspen Times: Earlier this year the owners of St. Regis invited a number of local high net-worth individuals to a presentation about the IPO. Would something similar be done with Aspen Digital?
De Baets: Likely held the week of Sept. 17, this time we'll have a dinner at Chefs Club New York with a speaking panel of myself, Slava Rubin of Indiegogo, and Vincent Molinari of Templum Markets. We'll definitely have a dinner in the St. Regis Aspen for local high-net worth individuals after we close on the transaction.
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