Caribbean real-estate company launches $75 million STO

Might real-estate investors and fans of tokenized, digital assets have found a match made in paradise?

A Caribbean-based real-estate company is offering foreign investors an opportunity to buy up to $75 million worth of tokenized stakes in oceanfront properties in the Dominican Republic—with some big promises attached to each purchase.

The company, La Estancia Holdings, today announced the extension of a security token offering (STO) first launched in July. The STO will now run across three phases until early 2020 and is offering investors both large and fractional stakes in villas, townhomes, and hotel properties.

“We’re breaking down the traditional barriers to real estate investment,” Laurent Chemla, head of La Estancia’s blockchain strategy, said in a statement. “[W]e see leveraging blockchain technology as the best way to make real estate investment more accessible to everyone because of the transparency and automation it brings to fractional ownership and its promise of increased liquidity.”

The first phase of the company’s STO in July gave investors a chance to get pieces of a $10.7 million equity portfolio, which consisted of approximately 22 separate villas, townhomes, and cottages at the La Estancia Golf Resort in La Romana, Dominican Republic. The second, slated for the final quarter of 2019, will feature 123 residential units at the same resort (worth roughly $20 million). And the third STO will take place in early 2020 and gives investors a crack at a new, 240-room hotel development to be managed by an unnamed “major international hotel chain.”

As good as all that may sound, some aspects of La Estancia’s STO might give some investors pause, such as the promise of “low-risk, high-return yields,” a path to “inexpensive citizenship” in the Dominican Republic, and “significant tax breaks and benefits on investment income.” It’s enough to make us wonder what particular clientele La Estancia may be targeting.

In an email to Decrypt, however, Chemla clarified that La Estancia's proposition to potential investors should not be viewed as a guarantee. Rather, he said, "in the context of comparable opportunities, La Estancia Holdings presents relative low-risk and targets high-returns." Chemla added the targeted internal rate of return of "+30% is quite 'high' for comparable investments—especially in the Dominican Republic."

Chemla further explained that an investment of more than $200,000 in real estate in the Dominican Republic "qualifies for the Dominican Republic residency application by investment." Residency in the island nation can be established "in a matter of weeks," he said, so long as the investor meets other application requirements, such as a medical exam, and pays the required fees.

But if none of that sounds particularly appealing, the company also offers a more “conservative” alternative for buyers to instead invest in equity “which can later be converted to tokens without penalty,” according to today's announcement.

La Estancia also touts the Dominican Republic as the most financially stable country in the Caribbean, boasting on its website of United Nations-based research that indicates the island nation is undergoing an economic boom due in large part to tourism and foreign investment.

That may be, but the headlines that American investors are likely more familiar with are far less complimentary of the island. 

And given the number of American tourists that have died in the Dominican Republic over the past several months under mysterious circumstances, it’s a wonder how much longer that boom will last.