ECOSYSTEM | PORTARA

Our Ecosystem

Luxury residential real estate is the number one investment choice for high net worth and ultra high net worth individuals due to its stability and potential for appreciation per the 2023 Knight Frank wealth report with on average over 50% of UHNW individual investments going toward some form of real estate. Increasingly, residential real estate is also becoming a focus for institutional investors such as Blackrock and TPG. Our investment strategy takes luxury residential real estate, which sets an economic baseline of value and stability, and introduces an operational hospitality layer to increase yields without changing the fundamental protection of the physical asset. It’s all upside, meaning the downside is a long term lease which is the same as residential, and the upside is hotel-like returns but better because we’re effectively buying and financing at residential valuations with significantly less cost and operational risk than hospitality, which lead to higher profit margins. With a $250 trillion residential market and very limited institutional involvement (though increasing), well located luxury short term rentals are quite literally the largest, most scalable, most profitable opportunity in real estate today without needing to take excess financial risk or new development risk.

A vehicle such as our flagship fund is required to unlock the full investment potential of short term rentals while incorporating numerous battle tested portfolio management techniques and integrating highly sophisticated technology to improve the risk adjusted return, management capabilities, and entire investment experience. While wealthy individuals have known this for some time, as a first mover from an institutional perspective, we have an amazing opportunity to capitalize and provide an unparalleled investment vehicle focused on international luxury residential and the short term rental space.

Return Based Investors

There is far too much capital chasing the same real estate with the same business model, allowing for no true competitive edge and instead leading to cap rate compression, overleverage and increased financial risk with low going in yield hoping the market appreciates in order to make their desired return. Office and retail are in secular decline, multifamily and industrial are stable but overpriced.

A recent study by Revedy in an analysis of over $20 billion of short term rentals found that only 3-5% of the market was professionally optimized, and the study “regularly” found high cap rate opportunities with the ability to optimize by 30-40% within one year. In fact, the research found that 90% of properties are single asset owners and not professionally owned and operated. Further, the top revenue management tools such as Price Labs and Beyond estimate that only 10-35% of properties effectively use dynamic pricing and roughly 80% of listings are only on Airbnb ignoring the dozens of other high yielding channels such as Booking.com and Homes & Villas by Marriott.

These sophisticated revenue management and multichannel distribution strategies have been deployed and honed for decades in the hospitality industry and utilizing skilled revenue management is the norm amongst professional hospitality owners & operators such as ourselves.

We have multiple strategies we employ to identify and acquire assets, one of which is detailed in the base study below looking at a rental arbitrage repositioning opportunity.

It’s no surprise that the majority of investor wealth is gained in bad times. This is where the best deals happen for those who are prepared. With all the pieces in place but no meaningful STR institutional ownership yet, in a recession we can expect to see major opportunity through forced and discounted selling as many individual owners simply are not financially well heeled enough to weather a protracted downturn as are institutions and private equity funds.

While value-add repositioning and management optimization strategies add a profitability cushion to existing portfolio assets, our structure uniquely positions us to take advantage of a distressed environment by discounted buying through the cycle. Improving our investment basis through dollar cost average purchases will allow us to realize wealth building appreciation as the market recovers.

Also, unlike traditional distressed asset funds, we can invest and produce yield without waiting for the distress to happen. Furthermore, with geographic diversity, we are able to cherry pick the best locations to invest at any given moment in time.

This means we are not market timing and are more readily prepared to take advantage of market swings when the opportunity arises. Distress can open the doors to prime markets that may have been previously financially unprofitable, allowing us to build a more desirable and resilient portfolio.

Our investors own true real estate with all the benefits of owning real assets, appreciation, income, and tax depreciation benefits. Through our professionally structured platform, investors gain exposure to international assets through a streamlined, tax efficient, operationally streamlined, SEC compliant structure. All the complexities of international investment are neatly structured in a way only capable in an institutional investment fund.

By broad measure, luxury residential real estate has outperformed most other asset classes and is an ideal way to gain international exposure. Furthermore, part of the benefit of investing in real assets for wealth preservation is the ability for real assets to transcend the banking system. You cannot replace an asset that has an internationally desirable location, and your investment is not directly exposed to currency collapse or bank failure, but you do get the benefit of diversifying away from your home currency, be it the US Dollar or otherwise, to help protect your wealth. For US investors specifically, the dollar is sitting with a relatively strong value vs an international currency bucket and with a longer term outlook of value erosion, now may be a very well timed opportunity to diversify.

Layering on our technology, our investors are afforded a level of flexibility, personalization, and opportunity previously unavailable or infeasible. With the ability to take a cash dividend, reinvest for compound growth, use dividends for an owner discounts at the properties for further value, grow dividends through simply holding them on platform, and elect your own investment term with the ability to trade even during the lockup period, the opportunities to manage each individual investment the way that best suits the specific needs of each investor are unparalleled in real estate investments. Further, you can elect a Euro or Dollar based distribution, and as we roll out our permissionless debt platform and yield strategies investors will have greater and greater ways to utilize their distributions to manage risk and enhance yield.

Personalization
Investment flexibility suits all types of investors
Dividend investor
Growth investor
Lifestyle investor
Portfolio investor
Digital native

Finally, tokenizing not only the fund investment, but also the distribution allows for digital natives to remain fully digital without needing to directly reenter the banking system.

Finally, one of the more interesting use cases that comes from the unique ability short term rentals offer is that investors are also potentially consumers, which opens the door to generating additional non-cash value through self-use.

This creates a number of beneficial ecosystem dynamics including:

Allows fund to potentially backstop economic returns with non-cash value through nightly stays, giving all investors additional downside support

Value delivered in nightly stays can then theoretically be used, or effectively sold to generate additional cash flow

Free or highly discounted nightly stays also correlate well with demand dynamics, meaning when additional value is most needed, the properties will likely have more open nights available thereby minimizing or completely avoiding guest displacement

Internal use of properties also increases demand which in turn allows us to yield manage tighter to generate higher cash flows

Over time, nightly coupon purchases through a non-ownership vacation club style program could be used to further bolster internal demand and allow the fund to lock in predictable profitability

Lifestyle Investors

Own luxury homes across the world in places you love to visit

without the complexity and hassle of home ownership, operations and maintenance
without worrying about the legal and tax details
without taking on the cost burden alone
while diversifying your investment both geographically and averaging over time
while accessing the flexibility built into our platform
all while making an attractive income with numerous follow on platform yield opportunities and being able to use the properties any time they’re available to be rented without feeling stuck or obligated to use your properties.

Other vacation investment funds lock you into the investment with no opportunity to exit, no income (in fact some groups charge an annual fee on top of your investment), forced use (if you don’t use the property, you don’t get anything in return) and still take on all the risk of investing or worse, you don’t own anything and are simply spending money. Also, closed end funds require a sale at the end of their legal life, which means the portfolio is always in flux. With us, the portfolio has the ability to continue to grow as our fund grows.

While some investment churn is possible, the best assets will never have to exit the portfolio and investors can leave at their election subject to their chosen lock up or even before through secondary trading. Vacation club investments typically also aren’t institutionally structured with a preferred return, which is customary in private equity and serves to help insulate investor’s return.

With us, your investment pays you, and you retain all the benefits of being an owner. Use the properties only when you want, and in the meantime you can grow your wealth not just by hoping the market appreciates, but through passive income generation.

Property Market Participants

Property Market Community

Luxury Vacation Homeowners

Diversify your risk by contributing your property to our fund. Contribution in lieu of acquisition allows for attractive and creative structuring that can create a win-win for you and the fund, unlocking value for both while spreading your exposure.

Short-Term Property Managers

If any of your owners have an interest in selling or contributing a property that fits our criteria, there are opportunities to make additional income by facilitating the deal and in many cases we can engage you to continue managing the asset.

Real-Estate Professionals

Real estate brokerages and agents in target markets are local experts that can programmatically earn commissions for sourcing quality assets as we grow our portfolio.

Defi Community

We bring real and predictable on-chain yields using interest rate curves properly priced based on risk premia. Most borrowing in defi focuses on utilization to maintain sufficient liquidity, which creates a highly volatile yield and has led to a dry landscape with lending rates that in many cases have fallen below the risk free rate. We utilize similar rate curves but because we are a CDP platform without the need for a lending pool, our contracts are able to sensitize on leverage similar to traditional finance risk analysis. The yield will adjust over time as a swap spread to SOFR and will always priced appropriately for risk without arbitrarily fluctuation tied to utilization. KEY stakers can participate in the yield charged to borrowers.

KEY is designed to be overcollateralized at all times by limiting borrowing power and dynamically adjusting interest rates based on loan to value (health factor) thresholds. The token is also intended to have stable value due to organic buy and sell pressure mechanisms but may fluctuate based on market dynamics. If KEY increases in value, investors will be incentivized to mint additional KEY and exchange on DEXes. If KEY falls in value, borrowers will be incentivized to purchase KEY to repay their debt at a discount. We also intend to unveil a stability module on platform as well as fund an arbitrage trading algorithm.

For defi to grow, protocols need to bring off-chain investment profits on chain and offer predictable

yields. Today, most defi protocols tend to shuffle the cards without increasing the deck by awarding

zero sum swap fees, or highly inflationary token emissions.

To scale, there is a strong need to pull value into the system in a compliant manner that works with existing investment legal and regulatory framework while improving and automating where possible. Our platform does exactly this by tokenizing profits as well as the security investment and allowing for value composability into the greater defi ecosystem through our non-security utility token. As we progress on our roadmap, we have additional markets that will lead to a host of novel yield opportunities and risk management strategies.

Connecting security investments to decentralized finance will represent a major opportunity and necessary progression as major institutional players also continue to make inroads into blockchain tokenization.

Over time, we will also be introducing a number of various permissionless, non-custodial, fully algorithmic yield strategies for defi investor community use.

Fund investors may choose to take advantage of the yield spread between borrowing KEY and participating as an LP or in any given yield strategy as they may determine, thereby increasing their investment returns by stacking the yield on real estate with the additional net yield from the strategy chosen. The strategies are intended to provide a higher yield than the minting interest rate, thus creating a flywheel of borrowing and investing, and KEY minters may repay KEY at any time if the yield spread becomes unprofitable.

The yield opportunities are also meant to provide uncorrelated yield to the base real estate to give fund investors diversified options to boost their returns.

Our flagship investment fund provides the economic and structural backbone to jumpstart our defi

protocol while benefiting fund investors with built to suit technology. We’re revolutionizing compliant

institutional grade investing with our composability engine. The core functionality includes a

collateralized debt framework similar to AAVE’s GHO or Maker’s DAI but with securities compliant

infrastructure whereby fund security token holders may collateralize their VILLA tokens and mint our

ERC-20 utility token KEY subject to a risk adjusted market interest rate.

KEY holders are not exclusively minted by collateralizing VILLA but can also be minted directly on platform or exchanged on DEXes. KEY holders can stake on platform to participate in the interest received or participate in liquidity pools on DEXes in exchange for receiving swap fees. Also, something more uncommon in defi, KEY may also be used to reserve vacation nights at properties owned by the fund at a discounted rate.

We have much more on our roadmap and our ecosystem will continue to grow with exciting novel opportunities to participate profitably.