BRECO1 (BITREAL Real Estate Blockchain Opportunities Fund 1) is a regulated closed-end specialized AIF that allows professional and semi-professional investors, as well as owners of cryptocurrencies, to invest directly in German AA commercial real estate in top regions that is otherwise only accessible to private equity companies and institutions.
Investing in BREBCO1 allows owners of cryptocurrencies to invest directly in high-quality German real estate without first exchanging FIAT money, in order to be able to collect regular rents and still be able to benefit from the potential for appreciation of relevant cryptocurrencies.
This has several advantages:
- Existing cryptocurrency gains can be “parked” in a very stable business model without first having to exchange them for FIAT money. Distributions can also be made through cryptocurrencies (alternatively also in FIAT money).
- An existing cryptoportfolio can be better diversified through BREBCO1 or the later BITREAL Coin, as the investment significantly reduces the correlation and volatility in the crypto investments.
- Investors who are not yet in possession of cryptocurrencies can use euro money to invest in a promising strategy—and at the end of their term even have the option to pay out the winnings and the deposit in euros, Bitcoin, or Ether.
The BITREAL 3-component concept refers to the appreciation or devaluation pressure of the asset classes used, and describes the superior investment strategy.
Inflation-protected real estate and the deflationary crypto currencies, which are subject to appreciation, are partially financed by inflationary FIAT money (euros). In addition to investing in AA commercial real estate, investors benefit from opportunities in cryptocurrency investments as well as long-term inflation (1% to 2% p.a.) in FIAT money, because liabilities are held in FIAT money rather than credits.
Both deposits and withdrawals can be made either in cryptocurrencies (Bitcoin, Ether) or in FIAT money (euros). We are currently working intensively on further deposit and withdrawal methods.
At present, an investment in BREBCO1 is reserved exclusively for professional investors as per Section 19, No. 32, Par. 1 KAGB and semi-professional investors as per Section 19, No. 33, Par. 1 KAGB. However, we are in permanent consultation with regulators and expect a legally compliant solution by the end of 2018.
Investments are made in a closed German registered specialized AIF (Alternative Investment Fund) called BRECO1. Either cryptocurrencies or FIAT money (euros) can be used to invest.
Questions about the Business Model
The business plan considers the following distribution as the ideal optimization of the portfolio:
- AA commercial real estate: 75%
- Cash position (crypto portfolio): 20%
- EURO reserve: 5%
The regular change in the value of the relevant assets may lead to slight deviations from the target values.
Yes. The aim of the portfolio is to make it possible to seize the opportunities of cryptocurrencies without having to take any unnecessary risks. Therefore, in the event of a beneficial development of the portfolio, profit-taking amounting to 20% occurs each time a gain of 100% of the cryptoportfolio is recorded.
Our quantitative analyses have shown that, despite increasing complexity and cost, increasing diversification through holding many different cryptocurrencies does not allow for a more diversified—and thus more stable—portfolio to be built. This is due to the high correlation of Altcoins versus Bitcoin. For this reason, the cryptoportfolio focuses on those cryptocurrencies (currently Bitcoin and Ether) which are the largest by market capitalization over a three-year average. In our analyses, both Bitcoin and Ether impressed with a below-average correlation.
BITREAL Capital GmbH focuses on stable processes and believes in the long-term assertiveness of relevant cryptocurrencies. For this reason, cryptocurrencies are carefully selected (see section “How many and which cryptocurrencies are there in the portfolio?”) without focusing on market timing. In addition, regular studies have shown that a trading approach, even before costs, is unable to beat a buy-and-hold approach.
Questions about the Investment Strategy
The acquisition team of BITREAL Capital GmbH boasts more than 20 years of experience in private equity real estate and can additionally fall back on a broad network. What’s more, the speculative component of the cryptoportfolio allows competitive prices to be paid.
BITREAL Capital GmbH properties are financed exclusively in accordance with the relevant term, i.e., financing will last at least as long as the life of the fund. Thus, this eliminates the risk of interest rate changes.
Investments are made exclusively in certified, German AA commercial real estate in the top 10 economic regions. The stringent investment criteria consist of a 40-point catalog of requirements focused on safe investment in stable, non-seasonal industries. More detailed information can be made available to investors by telephone or at one of our regular workshops.
If a property fundamentally meets the requirements profile of BITREAL Capital GmbH, an internal due diligence process will be carried out by the acquisition team. Several instances ensure the external assessment of a property: The financing conditions (ostensibly: loan-to-value) of the credit institutions represent a first, implicit seal of approval of a potential property. An external technical and financial due diligence process performed by an auditing company as well as an external report further ensure the profitability of an investment.
The commercial real estate is acquired after extensive examination by the internal capital management company BITREAL Capital GmbH, which is also responsible for compliance with the investment criteria as well as the mandate and auditing.
Technical Questions about Blockchain and Smart Contracts
The blockchain promises a high degree of automation, security, and global availability to optimize existing processes. Other important features are decentralization, transparency, traceability, and immutability. It provides a decentralized network for storing and processing values and information. The nodes of this network are regularly reconciled through a consensus algorithm and automatically synchronized. The exchange of values takes place directly, which greatly reduces activities between the respective parties. This goes so far that intermediaries (such as classic banking transactions) can be replaced with a high degree of security. The blocks generated by mining are described by cryptographically secured transactions. Transactions are thereby stored transparently, traceably, and immutably.
Smart contracts are the “heart” of every blockchain solution. These ensure the decentralized and automated execution of digital contracts. In addition, they ensure consistency within the network. This prevents unauthorized changes of the respective information, thereby guaranteeing very high security standard. Central process steps of the respective service are represented by pre-agreed protocols and executed automatically within the smart contracts. Combined with the blockchain technology, these processes are transparent, traceable, and immutable, ensuring a very high level of security and privacy for each user. The automated execution of the respective smart contracts can replace intermediaries, thus enabling very high efficiency increases and significant cost reductions.
The BITREAL coin is covered by commercial real estate and uses the ERC-20 token standard of the Ethereum network. The use of this standard ensures that the most widely used token technology is in place today, reducing the total lifecycle management burden from the initial coin offering (ICO) and purchase to completion and sale of each token as much as possible.
Yes. The introduction of new technologies, such as blockchain, cryptocurrencies, and smart contracts, puts many business models within the investment industry to the test. The changed framework conditions make it necessary for established companies to adapt to this paradigm shift and to modify existing business models. BITREAL Capital has understood the immense potential of this young and revolutionary technology. The introduction of the BITREAL Coin will provide a solution that will allow future investment products to benefit from this innovative technology. Building on our extensive expertise, we support companies in their transformation towards blockchain.
Do you have any further questions?
Do you have any further technical, strategic, or legal questions about the BITREAL ICO, or do you require further information? We will get back to you as soon as possible: Contact.