Tokenized Real Estate Investment Fund Using TNcoin

TNcoin is a commercial venture, not a philosophical attempt to create a new monetary paradigm. TNCoin is a savings platform backed by a non-inflationary asset, commercial debt-free real estate, to deliver stable capital preservation. As a cryptocurrency, it enables savers to convert their money to and from TNcoin tokens using the full security and convenience of blockchain technology.

The Fund believes that the value of its underlying token will increase in value as the value of its real estate holdings grows. Further, the Fund believes that people and institutions who hold large blocks of bitcoin, ether or other cryptocurrencies are looking to diversify their holdings into alternative coins. These alternative coins, often abbreviated to ‘alt-coins,’ are highly correlated with bitcoin’s and ether’s price movements. Additionally, TNCoin will allow holders of fiat currency to buy tokens during its Private Sale and its presale.

The token will be using the Stellar Consensus (XLM) protocol. The Fund considers its token to be a security token, meaning it is a financial security. The Fund, therefore, anticipates being subject to securities laws in the United States. Additionally, the Fund will only sell the tokens to accredited investors in the United States and foreign investors outside the United States except for those sanctioned. During the pre-sale, tokens can be bought with fiat currencies, including USD, Euro, British Pounds, Yen, or Won. The smart contract will enable investors to work within the regulatory framework already in place to exchange and trade amongst other verified accredited investors. The smart contract will also enable for automatic and self auditing dividend disbursements. This will provide the liquidity investors want and need.

FUND MANAGERS-THE TEAM

The Company was founded by Luis A. del Mazo, Jr. and Tanya Rodriguez who have more than 40 years of combined experience in the real estate industry. Through their expertise, they expect to maintain, manage and increase the profitability of the business.

Luis A. del Mazo, Jr. Graduated from ITT Technical Institute, with a degree in Business Administration, salutatorian of his class in 2012. Luis also holds an Associate of Arts in Computer Aided drafting and design. Luis started his career in mortgage finance in 1996. In 1998 Luis became a licensed Realtor with Remax. From 1998-2008 Luis remained in Remax’s elite 100% Club as one of Remax’s top producers with hundreds of residential and commercial sales transactions.

During the last 20 Years, Luis has worked all facets of the Real Estate industry. Rental management, construction management, renovations, sales, structuring creative financing strategies, and investment consulting.

More recently Luis has been inspired to bring The Tennessee Real Estate boom to International Real Estate investors. His concept is not a new or unique strategy of syndicating or crowdfunding commercial acquisitions, but the concept of using blockchain technology is. Blockchain allows the investor to now take their investment off the exchange and trade with other investors directly. In other words, Blockchain allows for the portability, fungibility and fractional breakdown, to be used as an optional medium of exchange.

Tanya Rodriguez began her real estate career at for Colliers Turley Martin Tucker in Nashville as a receptionist in the mid 90’s and while working there she found she loved the real estate business and immediately acquired her license in 1998. Tanya wanted to learn the full scope of the real estate business so she also learned about mortgage loans and applied and passed her property and casualty exams and became fully licensed.

During the last 20 years, Tanya has sold residential homes, land, a hotel, gas stations and a warehouse. In addition to her sales experience she has rental management experience. Tanya has also personally renovated and flipped many personal investments.

When the real estate market crashed Tanya took a position with the Tennessee Fair Housing Council for six years as an Investigator of housing discrimination and was fully trained in the intake and investigations of such matters. After six years of resolving complaints in a fair and amicable way for both landlord, management companies, and tenants she became the Assistant Director of the organization.

While working at the Tennessee Fair Housing Council she was trained on the Uniform Residential Landlord Tenant Act (URLTA), the Fair Housing Act, the American with Disabilities Act (ADA) to better assist complainants and educate landlords this also benefited her in her real estate investments.

TOKEN

Stellar is a blockchain platform that is primarily focused on integrating distributed ledger technology into existing financial infrastructure. The Stellar consensus protocol is an open-source protocol for exchanging money. Stellar connects Banks, payment systems and people around the world. Smart contracts combine protocols with user interfaces to formalize and secure relationships over computer networks. Objectives and principles for the design of these systems are derived from legal principles, economic theory, and theories of reliable and secure protocols.

TN tokens will have an initial value of 1 TN to 1 USD. The number of tokens created will equal the dollar amount raised, rounded down to the nearest whole dollar. If $10 million in the capital is raised, then 10 million tokens will be created. Tokens are divisible into 0.1, 0.01, and 0.001 TN. Tokens are divisible into subunits solely for investors’ convenience. The Fund may periodically buy tokens on the open market and burn them. “To burn” tokens means to permanently destroy them, and so reduce the supply of tokens outstanding. This is conceptually equivalent to a stock buyback in a conventional company. Management intends to receive a 10% management stake in the fund, hold 10% for operating and reserve, while distributing the other 80% to token holders. Management will also receive 10% of total revenue generated at initial coin offering to cover all incurred cost and expenses.

The Fund believes that there may be times when the spot price of the token is less than the net asset value per token (NAVPT) of the Fund. When this is the case, the Fund will have the option to buy tokens on the open market and burn them. The Fund believes buying tokens on the open market when its spot price is less than the NAVPT, and subsequently burning them, is prudent capital management. The Fund additionally believes that buying back tokens on the open market will provide a floor for the spot price of the token.

The Fund may, at its discretion, buy back tokens on the open market if the spot price of the tokens falls below 75% of the Fund’s net asset value per token for the most recent quarter. For example, if the Fund’s NAVPT for the most recent quarter is $1.25 and the spot price of the token is $0.925, the Fund may elect to buy back some tokens on the open market.

For the purposes of this white paper, the Fund defines Net Asset Value Per Token as:
[(operating income / cap rate) – debt] / (number of coins in existence)

This calculation is analogous to a net asset value per share (NAVPS) calculation done for a traditional REIT.

Token holders will receive quarterly dividends after the first twelve months of reaching the soft cap which will be distributed directly to each token via automated token smart contract. Token buybacks and burns are also considered a form of Dividend benefit to token/shareholders.

Why Blockchain and Cryptocurrency Technologies?

TNCoin differentiates itself from other cryptocurrency projects by being a tokenized investment fund. This means that each token is analogous to a share in an investment fund. A natural question that arises is why the Fund would use cryptocurrencies at all, given that traditional share-based investment funds have been around for decades, and are well understood. For example, the law allowing the formation of Real Estate Investment Trusts (REITs) was passed by Congress back in 1960.

There are a large number of people who own significant amounts of Bitcoin or Ethereum or both, who are looking to diversify their holdings, without converting to fiat assets. TNCoin provides holders of large amounts of cryptocurrencies the opportunity to buy into a real estate investment fund, the value of whose cryptocurrency will be derived in large part by the performance of the real estate. In other words, the TN token will derive its value primarily from real assets in the physical world that generate income and which increase in value over time.

Tokenization of traditional assets (including real estate) is coming, and TNCoin is merely one of the first investment funds to tokenize itself. Real estate tokenization is happening around the world.

The blockchain will enable real estate assets to be tokenized and traded similarly to Bitcoin. Property titles and ownership histories will be recorded on the blockchain, and the value of a property will be represented on the blockchain by a token. Blockchain will allow commercial buildings to have a digital address that contains information regarding occupancy, physical characteristics, legal status, historical performance, and financial position.

As commercial property information continues to disseminate across the globe, brokers will lose their information asymmetry advantage. The data will be available online and relatable across submarkets and property types. When it becomes easier for investors to gather information on potential acquisitions, it will be easier to price buildings without investment brokers.

Furthermore the tokenization process will allow investors to exchange their assets with other like investors and access the liquidity they want and need. By using the most innovative protocol like Stellar Lumens, TNCoin tokens will have KYC/AML built into its smart contract to identify other verified accredited investors and can be exchanged after the 90 day period. Smart contracts offer other automated features like disbursement of dividends, self auditing and have built in decentralized exchange known as DEX. Buy using this technology investors can be confident in having the liquidity the want and need.

All this will be built-into a easy and friendly user interface which can be accessed either desktop or mobile wallet.

THE REAL ESTATE INVESTMENTS

TNCoin will invest in multi-family housing in Tennessee and surrounding areas. These assets are income producing, institutional-quality real estate that need renovation or redevelopment. The Fund will improve the real estate, refinance the equity, and reinvest the proceeds into additional properties.

Investment Option #1:

The Fund has already identified several properties for its initial investments, one of them being a 68 unit apartment complex located at 1601-1603 Herman Street. The property was appraised by McGuigan & Associates for $16,070,000. The full report for this Property can be found in the Supplementary Materials section of this white paper or at
https://drive.google.com/file/d/1iO3y_PtvWESPbjV6xaDQGWYBrOoRG7xK/view?usp=sharing

Investment Option #2:

Another potential investment is a 42 unit residential portfolio in Chattanooga, TN. Management is looking to acquire the portfolio for 2 million dollars. This 42 unit well managed, the mixed portfolio is comprised of 30 single families, 3 duplexes, and 2 triplexes. All properties are within 2 miles of the vibrant downtown area. Many of the units have Gov't subsidized and/or long-term tenants. The properties are all within a mile of each other and are in noticeably growing communities. Several of the homes have undergone extensive renovations limiting the maintenance costs throughout the duration of ownership.

Management has derived a strategy of selling off Residential units with financing options to create notes for a fixed rate of return while reducing the costs of insurance and property taxes. Management believes that this strategy will also help stabilize the token and create a slow and steady rate of return.

Chattanooga, TN is a marketplace undergoing much growth as a result of many Fortune 500 companies including VW, Amazon, Blue Cross Blue Shield migrating to the city in the past few years. The city is a transit hub which lies 120 miles northwest of Atlanta, Georgia, 120 miles southwest of Knoxville, Tennessee, 135 miles southeast of Nashville, Tennessee, 120 miles northeast of Huntsville, Alabama, and 148 miles northeast of Birmingham, Alabama.

MARKET RESEARCH

Nashville MSA

The Nashville MSA area is the 36th largest Metropolitan Statistical Area (MSA) in the United States and the largest metropolitan area in the state of Tennessee.

Nashville is the capital city of Tennessee. It is located on the Cumberland River in Davidson County in the north-central part of the state. Nashville is a major hub for the healthcare, music, publishing, and transportation industries.

Nashville has a consolidated city-county government which includes seven smaller municipalities in a two-tier system. The population of Nashville-Davidson County stood at 668,347 as of a 2014 estimate. The estimated 2014 population of the entire 13-county Nashville Metropolitan Statistical Area was 1,792,649, the largest metropolitan area in the state.

As surrounding counties saw an increase in their population densities and the number of their residents employed within Davidson County, they met Census criteria to be added to the MSA. Davidson County is now joined with twelve other counties to form this MSA. The Nashville Metropolitan Statistical Area encompasses the Middle Tennessee counties of Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson. Maury County is not included in the Nashville MSA area but is included in the Nashville-Davidson-Murfreesboro-Columbia, TN CSA.

Information for this Area Analysis was gathered from the Nashville Area Chamber of Commerce, the US Census, the Federal Reserve, Wikipedia, and the Nashville Business Journal.

Geography

Nashville lies on the Cumberland River in the northwestern portion of the Nashville Basin. Nashville's topography ranges from 385 ft above sea level at the Cumberland River to 1,160 ft above sea level at its highest point.

According to the United States Census Bureau, the city has a total area of 526.1 mi². 502.3 mi² of it is land and 23.9 mi² of it (4.53%) is water.

Economic Overview

As the "home of country music", Nashville has become a major music recording and production center. Almost all of the national record labels, as well as numerous independent labels, have offices in Nashville, mostly in the Music Row area. Since the 1960s, Nashville has been the second biggest music production center (after New York) in the U.S. As of 2010, Nashville's music industry is estimated to have a total economic impact of $10 billion a year and to contribute 56,000 jobs to the Nashville area.

Although Nashville is renowned as a music recording center and tourist destination, its largest industry is actually health care. Nashville is home to more than 250 healthcare companies, including Hospital Corporation of America, the largest operator of hospitals in the world. As of 2010, it is estimated that the healthcare industry contributes $30 billion a year and 210,000 jobs to the Nashville-area economy. The automotive industry is also becoming increasingly important for the entire Middle Tennessee region. Nissan North America moved its corporate headquarters in 2006 from Gardena, California (Los Angeles County) to establish a permanent headquarters in the Nashville suburb of Franklin, Tennessee. Nissan also has its largest North American manufacturing plant in Smyrna, Tennessee, a Nashville suburb. Bridgestone North America is building a 30 story office tower in SoBro Nashville to consolidate its operations. It will employ 600 people at this new headquarters.

Other major industries in Nashville include insurance, finance, and publishing (especially religious publishing). The city also hosts headquarters operations for several Protestant denominations, including the United Methodist Church, Southern Baptist Convention, and National Baptist Convention, USA.

Education

Vanderbilt University, founded in 1873, is Nashville’s most prominent university, enrolling over 12,000 students. Within 30 miles of Nashville in Murfreesboro is Middle Tennessee State University (MTSU), a full-sized public university with Tennessee's largest undergraduate population of over 21,000 students. Other colleges and universities in Nashville include American Baptist College, Aquinas College, Belmont University, Draughons Junior College, Fisk University, Free Will Baptist Bible College, Gupton College, Lipscomb University, Meharry Medical College, Nashville School of Law, Nashville State Community College, Strayer University, Tennessee State University, Trevecca Nazarene University, University of Phoenix, Watkins College of Art and Design, and Nashville Auto Diesel College. Enrollment in post-secondary education in the City is 43,000 (approx.).

Within the Nashville Metropolitan Statistical Area which includes MTSU, Cumberland University (Lebanon), Volunteer State Community College (Gallatin), and O'More College of Design (Franklin) total enrollment exceeding 74,000. Within a 40 mile radius is Austin Peay State University (Clarksville) and Columbia State Community College (Columbia), enrolling an additional 13,600 Transportation.

Nashville is centrally located at the crossroads of three Interstate Highways: 40, 24, and 65. Interstate 440 is a bypass route connecting I-40, I-65, and I-24 south of downtown Nashville. The Metropolitan Transit Authority provides bus transit within the city.

The city is served by Nashville International Airport, which was a hub for American Airlines between 1986 and 1995 and is now a mini-hub for Southwest Airlines.

Although it is a major rail hub, with a large CSX Transportation freight rail yard, Nashville is one of the largest cities in the U.S. not served by Amtrak.

Nashville launched a passenger rail system called the Music City Star on September 18, 2006. The first and only currently operational leg of the system connects the city of Lebanon to downtown Nashville. Legs to Murfreesboro and Gallatin are currently in the feasibility study stage. The system plan includes seven legs connecting Nashville to surrounding suburbs.

Current Real Estate Economy and Summary

The present outlook for the Nashville MSA is considered to be good to very good. As stated in the Moody’s report, Nashville is in an Expansion portion of the real estate cycle. The revitalization of Nashville's inner loop is tremendous: combined public and private investments include over $1 billion for public projects including the new Music City Center convention center and the Schermerhorn Symphony Center. There are numerous private projects that are underway and recently completed in Sobro and The Gulch areas. One notable development is a new 800-room Omni Hotel accompanies the new convention center and is attached to the Country Music Hall of Fame. Many high-rises and mid-rise mixed-use developments are being planned in the Gulch, SoBro, Germantown, and Mid-town neighborhoods. A new AAA-baseball park was built on the north side of Downtown which has spurred development to the north. Other neighborhoods that have seen legitimate revitalization include Sylvan Park, The Nations, Wedgewood-Houston, and Germantown.

It is anticipated that development throughout the area will remain steady. Real estate values are currently appreciating. Long-term prospects for all sectors of the area’s real estate economy are expected to continue along a solid path of growth in quantity and value. The diversity of the economic base, the physical appeal of the city, and a reputation as a desirable living environment bolster the long-term future of the city. The city remains a favored location for relocating the business and should maintain a pattern of steady growth through the decade.