Hey everybody it’s me, Adam Chapnick. Welcome back to the Security Token Academy. I am excited to be joined today by Louis Adimando, of the Praetorian Group. Thanks so much for joining us.
Thank you for having me Adam.
All right, so you are doing a lot of interesting things. You’re kind of doing two huge things rolled into one.
Tell us about that.
Well, when we play we like to play big. So you know we have a two phase project right now. The first phase of our project is a real estate play. So similar to a REIT we are going to buy a portfolio of real estate, both residential real property and commercial. The portfolio will look about 80/20 residential to commercial and pay dividends off of that to our investors. So that’s our first phase we plan on getting through all that in about 12 months, building out the portfolio. It should be valued at about $600 million dollars after the first 12 months, that portfolio. Phase 2, which is called phase 2 but it is a concurrent project is to build out a debit network.
Yeah. So, it’s kind of like a REIT meeting Visa. On the real, real deal nerd level.
Yes please. You know your customer here.
I like to think of our token as a new way to look at money, generally.
For the longest time money just was being represented by let’s say a piece of paper.
And that equals a value but you never got paid for holding it. The only time you did for a little bit, was when banks actually paid you interest on your savings but that doesn’t exist in this world anymore.
Our company wants to bring that back. So, it’s a new, our play is a money play. Right, a currency or a store value play but you could look at us as a security token chasing the REIT market and the Visa market.
Wow! Okay so there, when we talk about security tokens there’s a whole like sort of expertise that’s needed to kind of even go down that road.
We talk about real estate, there’s a whole other like kind of expertise.
Talk about debit, a whole other. So what’s your background and what’s your team like?
I am one of the co-founders. My other co-founder, we’re both lawyers.
So that’s a start.
There you go.
So we understand the regulatory environment. I worked in financial services for about 8 years. I worked at J.P. Morgan, Credit Suisse, and most recently Bank of Montreal before coming aboard full time with the Praetorian Group. My partner has been a real estate attorney for I think it’s 20 years now. He’s been doing real estate transactions and corporate work.
So the real estate play we get. We understand. The merchants servicing side is a complex business but we’re looking to simplify it. We do have some advisors who have set up merchant services networks, have relationships with some of the bigger names and bigger networks so that’s exciting. On the crypto side, I’ve been in crypto since about the end tail end 2012 early 2013.
I was introduced to the bitcoin whitepaper first and then just dove into it and just kept reading and reading and reading. Totally in love with crypto and the possibilities.
To me securitizing assets into tokens and creating this massive amount of liquidity in markets that were traditionally illiquid is such an exciting proposition. Not only for the people participating in the token economy but for the holders of this illiquid asset.
They’ll be able to liquefy it and see money off of their assets is just a new world and really exciting world.
Let’s take one piece at a time. So on the real estate side is there any particular thesis or plan for what goes in and what doesn’t?
Yep. So I’ve developed what we call the Reverse L Strategy.
The Reverse L.
The Reverse L Strategy.
I like it. Sounds like a football plan.
Well my name is Louis right so I’ve got the L, so it’s the reverse L.
We’re going to start in New York City, five boroughs area.
Move down the eastern seaboard. Up until the top part of Florida and across into Texas. We’ve identified a lot of communities there that are undervalued and that we would really be able to help with our investment. And that is really the core of our company when it comes to the real estate plight.
When myself and my co-founder Gerard sat down to think about this company, the first principle that we decided on was we have to help people whatever we do. You know, we’re what I’d call two street guys.
We come from humble beginnings. Blue collar families. The first in family history to graduate college and law school type backgrounds.
Congratulations! That’s great!
Thank you. Very humble beginnings for us and we want to be able to take this exciting new technology and bring it to people who’d never be touched by it, you know otherwise. Improve the buildings that they live in. Improve their communities by bringing maybe vocational training or you know drug abuse centers, whatever we can do to help the community. That’s the core foundational principle of our company. So we built our strategy around that principle.
Amazing. So drug abuse centers, that would be part of the commercial...
Real estate or is that separate?
Not really the commercial side. It would be more the residential side.
The residential side? Okay.
Yeah. The reason why we are doing a residential play is you know, in the new world the Amazon-ization of the world. You can’t depend on you know, brick and mortar anymore to support a portfolio unless you have anchor tenants. So if you have, if you have Amazon as a tenant you’re pretty good. If you have IBM as a tenant you’ll be all right. But you know mom and pop shops while they might have a good net profit they might not exist. That storefront might not be able to be rented in time. But you always need a roof over your head. You’ll always have tenants in a residential building, for the most part.
What we’re seeing now is sort of a revitalization of communities starting in New York down the seaboard again that lost value because of manufacturing going overseas. Well a lot of that manufacturing is coming back because the technological advances allow for U.S. workers to compete with you know foreign workers where there was kind of a dynamic where we couldn’t. Also the government is making it easier for people to manufacture here. Right so these old school manufacturing communities whose real estate value dropped dramatically due to people moving overseas to manufacture are actually seeing an upswing. So, we’re going to catch that upswing. Really grow our portfolio too. We’d like to let it hit a billion dollars within the first 3 years.
Who wouldn’t? Right?
Exactly. But at the same time really help these communities because they’ve been ignored.
You know, why not let crypto be the vehicle to restore, you know, this country?
I love it and obviously in our you know world in this crypto world, there’s a lot of endeavors that have that component and we love being a part of that. I personal love that. So good for you for doing that. Now when you said let’s let crypto be sort of that engine for helping people let’s just say, can you walk us through how crypto will be a part of like main streets experience of this?
Sure. Sure. So you know a lot of the people that I envision being tenants in our buildings probably either have very small savings accounts, no retirement accounts at all, that’s really the community that I see helping. So they’ll have their Pax Card, our debit card, and they’ll be receiving dividends just for holding a Pax Token. So right away they have a vehicle to create more wealth.
Sorry to interrupt, Pax so is like a share of your REIT?
So the way we’re doing it is, it’s a securitized dividend stream.
Oh got it. Okay.
So you don’t get an ownership in the company.
But you get ownership in the net profit from the company.
So it cuts out all the voting nonsense and receiving proxies and not filling it out and all that stuff. But our tenants will be able to spend their crypto easily, go you know to the corner store and spend it. But to me the most important piece is the actual creation of wealth, new wealth. You can store your value. Let’s say you get paid in dollars, you buy more Pax Token hold it in your wallet. The more Pax Token you own the more your dividend will be and you’re creating wealth over generations. If you hold dollars you’re not receiving that wealth you’re actually losing money for holding dollars. So helping people understand how to save and create wealth and maybe go out and buy their own building. Or approach us and say “Hey I want to be a partner.” There’s a lot of opportunity there and we’re really excited to be able to help these people.
Amazing. Okay. Just to dig onto that, so I am, did you say unbanked or just this the sort of...
Well that’s the kind of catch phrase.
That this industry likes to use.
Unbanked. You know unbanked underbanked.
Underbanked. Okay. Yeah you know.
Okay so I got my paycheck or I got my money and I put all, some, whatever...
Into my Pax Tokens...
It’s throwing off its dividend...
Or not, hopefully it is...
So then how will I go you said you can go down to the corner store and spend it. How will I do that?
Yeah. So our network will allow for you to just anywhere that accepts a credit card or debit card you’ll be able to go spend it. The merchant doesn’t have to receive crypto, they can choose to if they’re you know if they’re excited about crypto as we are they probably want to receive it. Right? But they don’t have to. The exchange will happen in the background so you won’t even know really that you’re spending crypto it’ll be like spending a dollar. That’s how seamless we’re going to make the transaction on both ends, for the merchant and for the user.
That is really interesting. I haven’t heard somebody kind of putting it end to end like that yet. That’s great. So you said you have someone on your team that’s got the experience in that sort of the banking side...
The automated payments, what do we call that?
Yeah so, I call it merchant services.
Merchant services. Thank you. Yes. That’s right.
Yeah we do have someone who has set up many networks in the past.
Merchant servicing networks. While it’s not an ex-Visa employee per say but you know. He understands the business.
That we need to at the grass roots level, I’ll put it that way and that’s more important to us. Because I think as any start up knows you need people who have hit the streets before. You don’t need the CEO, the former CEO of XYZ company. It might make it easier to raise money having the former CEO but to actually set up and do the work you need the guy that’s hit the pavement before.
So we tend to have that, I keep using the term but street mentality of like all right, what have you done before not you know, what company have you run before.
That’s great. So you know we’re here with the Security Token Academy. We’re talking about security tokens. What’s the structure with regard to security token that you guys have?
From a legal perspective, the way we’ve set it up is similar to a preferred share.
You know after many, many rounds between ourselves as attorneys and our securities council we just decided to structure it in a way that the SEC would understand.
They understand what a preferred share is.
Right? So it’ll be treated just like any other preferred stock that you might buy through NASDAQ or whatever exchange.
That’ll be fine. Let them approve that. We’re not trying to pull any tricks or anything. They understand this product. So let’s give them this product. On the back end you’ll be using and trading and spending this crypto currency like a crypto currency. Part of the last panel with who had the former SEC Chair on it, what he was saying is, he doesn’t foresee new rules coming out for this space. So that’s how we decided months ago we were going to approach it. We need to fit this round peg into this square hole. How are we going to do that? So, we kind of bifurcated the idea of what a token is and what a security is and we said, okay it fits this which is a preferred share so we’re going to call it a preferred share. We’re going to treat it like a preferred share. But to the crypto enthusiast, they’ll understand our token as a crypto currency.
You have to get creative.
And I think I was talking to someone outside. I think that’s what a lot of the industry is lacking today. Believe it or not. There’s a lot of creativity around building blockchains. There’s a lot of creativity around funding companies through ICOs. But there’s very little creativity around, well what is this and what can we call it. So I blame the lawyers, as a lawyer I can do that. Lawyers need to get a little more creative when they’re creating what it is for their clients from a product perspective because we’re going to have to fit these very round pegs into very square holes.
I love it. So where do you hope you’ll be a year from now with the Praetorian Group?
Sure. I hope that we’ll have our portfolio built. We will obviously have been deemed effective by the SEC through our S1 filling. We’ll have raised our money. We’ll have built our real estate portfolio and we’ll be beta testing our first networks on the debit side. Our tenants will be very happy with living in our buildings. Solar. We’re going to retro fit a lot of our buildings with solar. Water purification. High speed internet. We have some people that we’re talking to that are trying to build premium internet service on the blockchain. So high speed internet. Through net neutrality rules changing, they’re able to do this. So we might partner with them and be able to implement this in our buildings. Or for our users or maybe get a special discount using the Pax Token. There’s a lot of exciting stuff we’re going to do.
So a year from now hopefully I’ll be sitting here with you talking about it.
Wow. It’s going to be a busy 12 months.
Yeah. Oh yeah.
Thanks telling us all about it and definitely do come back...
And share with us next year.
Thanks so much.
Thanks Louis. All right. Take care.
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