The Social Housing Enterprise, Inc.

Transcription

1 The Social Housing Enterprise, Inc. A Circular Economic Framework for Sustainable Affordable Housing Growth Utilizing Blockchain Technology and Securitized Crypto-Assets Operational Overview Ver. 1.6 Published March 5,

2 Affordable Housing The largest underserved real estate market in the world. Mortgage Interest Costs The highest fees charged for basic human needs. Social Innovation Elimination of fees & owner profits to explode affordable housing growth. Blockchain Technology Housing acquisitions via incentivized social network crypto-asset mining. 1

3 Contents Executive Summary. 3 The Problem.. 4 SOHO AHREIT Solution... 5 The Social Housing Enterprise, Inc.. 5 SOHO Social Network 6 SOHO Private Equity SREITs. 8 SOHO Utility Tokens... 9 Crypto-Assets Portfolio Property Offerings Portfolio Property Acquisitions.. 12 Portfolio Growth Projections.. 13 Rental Revenues.. 14 Real Estate Assets Property Management Initial Coin Offering (ICO) ROP Three Phase Strategy.. 15 Phase I: Funding 16 Phase II: Network Activities 16 Phase III: SREIT Operations Sustainable For-Profit Social Network Sponsorship Model.. 18 Crypto-Asset Value Why SOHO Matters Next Steps Glossary of Terms 25 References

4 Executive Summary The Social Housing Enterprise (SOHO) is a for-profit, social welfare corporation specializing in creation and acquisition of affordable housing supplies for cost-burdened families. SOHO will utilize a commercial blockchain network, on which a permissioned, side-chain social network (SSN) will operate to incentivize Soho sponsor contributions. Financial backing by incentivized sponsors will allow SOHO to fund acquisition of residential properties, where rental rates for each individual property will follow the U.S. Department of Housing & Urban Development (HUD) established 30% of annual family income affordability threshold. Housing supply for SOHO acquisitions will come from vacant residential properties within the U.S.; consisting of 17,550,000 vacant single family homes identified in a second quarter 2017 housing survey by the St. Louis branch of the Federal Reserve Bank (FRED, 2017). Newly constructed homes will also be added to the SOHO property portfolio through direct purchase agreements with independent home builders in target markets. SOHO will own, operate, and manage a private, affordable housing real estate investment trust (AHREIT) in which AHREIT portfolio properties will be offered for rent to qualified cost-burdened families. SOHO Sponsors will be handsomely rewarded for contributing to SOHO s affordable housing fund. Those rewards will come in the form of securitized crypto-assets generated as each new home is purchased for the SOHO AHREIT. Participating sponsors will mine utility tokens for their personal accounts by engaging in Soho social network activities. The token mining process is integrated into normal social activities such as posting stories, music, videos, commenting, sharing, and other user posts, and making new network friends. Utility tokens held in mining accounts will be automatically exchanged for crypto-assets immediately following purchase of each new AHREIT property. Crypto-asset distributions to miner accounts will be programmably matched to mining productivity of each individual miner. Miners will receive crypto-assets equal to their percentage of mined utility tokens in circulation. The percentage of crypto-assets received by each network miner will accurately reflect each miner s individual participation in social network activities. Crypto-asset owners are invited to exchange crypto-assets for share ownership in SOHO managed private real estate investment trusts (SREITs). SREIT shares will be offered as private securities under Title IV, Regulation A+, Type II of the 2012 American JOBS ACT (SEC, 2015). 3

5 Regulation A+, Type II offerings allow anyone in the world, rich or poor, to invest in private securities up to a maximum annual amount of $50 million for each offering. SREIT shareholders will receive rental income from SREIT residential rental properties, as well as equity share ownership in all properties added to each SREIT portfolio. Soho will add new SREITs in different geographical locations to keep pace with Soho social network growth. The SOHO Social Network Overview The Problem The U.S. Department of Housing and Urban Development (HUD, 2017) estimates more than 12 million U.S. households, now pay more than 50 percent of their annual income for housing. HUD further estimates 20.5 million cost burdened families pay more than 30% of their family income for housing. HUD established 30% of family income as the cost burdened threshold for housing affordability. That simply means more than 20,500,000 million American families today can not find affordable housing in communities where they live and work. Worldwide, the McKinsey Global Institute estimates that 330 million urban households live in substandard housing or are financially stretched by housing cost (McKinsey, 2014, p.4). The United States, European Union, Japan, and Australia combined, account for 60 million households that are financially stretched by housing costs (McKinsey, 2014, p.4). A study by the Urban Institute found that in the whole of the U.S. not one single state county can meet affordable housing demand by low-income families (Leopold et al., 2013). By 2025, approximately 440 million urban households around the world are expected to occupy crowded, inadequate, and unsafe housing; or will be financially stretched by high housing costs (McKinsey, 2014). From a standpoint of societal instability, we are facing a near term crisis as year after year, less and less affordable housing is made available to growing numbers of needy families. Governments around the world are struggling to provide affordable housing to low income citizen populations. Tax credits granted to housing developers is the most common government support method to help lower cost of new housing projects. Housing subsidies, provided by governments to needy families is a second method, but subsidies are greatly limited due to the growing financial burden taxpayers are forced to carry. Additionally, large 4

6 numbers of private and public organizations are actively involved in attracting charitable contributions to lower affordable housing development costs. All active methods to increase available supplies of affordable housing are undoubtedly noble and worth continued pursuit. Unfortunately, current methods to reduce costs and subsidize housing for needy families, are failing to keep pace with rising affordable housing demand. Simply stated, no combination of current practices, can be cited to effectively meet the rising housing needs of low income families worldwide. SOHO AHREIT Solution SOHO, in strategic alliance with established blockchain technology partners, will jointly develop a dynamic, blockchain based Social Enterprise Application to fuel growth of the SOHO Affordable Housing Real Estate Investment Trust (AHREIT). SOHO AHREIT properties will be offered for rent to qualified cost burdened applicant families at the HUD 30% affordability threshold. Applicant income will be programmably matched to property value following a formulated protocol that puts each family in a quality home befitting family size, financial budgets, and geographical locations. The Social Housing Enterprise, Inc. SOHO is structured as a for-profit, corporate social welfare enterprise. The organization s board of directors, are legally committed under articles of incorporation and company bylaws, to acquire residential properties to grow a private AHREIT as its sole social welfare cause. SOHO S enterprise mission statement is defined as, An entrepreneurial, socially responsible effort, to dynamically increase, operate, and manage affordable housing supplies worldwide. Application of revolutionary blockchain technology is the key operational component that will make SOHO s corporate social welfare mission possible. SOHO was incorporated as a for-profit social enterprise; much the same as Google.Org was created as a for-profit philanthropic charity in Google.Org was the first for-profit charitable corporation in the U.S. (Lim, 2007). A similar for-profit, philanthropic model was chosen for the SOHO social enterprise, for many of the same reasons Google elected to forgo the traditional non-profit model for their philanthropic efforts. Traditional benefits of tax exempt non-profit status, were found to be of insufficient value for SOHO s social enterprise mission. As with Google.Org, the constraining burden of IRS federal regulations for non-profit operating entities are actually counterproductive in the broad scope 5

7 of SOHO s innovative affordable housing model. Allowing government bureaucrats to pick and choose who qualifies to rent affordable SOHO portfolio homes, under non-profit regulations, would exclude the greater majority of cost burdened families who SOHO supports. The nature of a for-profit social enterprise, with a dedicated socially responsible purpose, is operationally no different than a non-profit operating charity with the same dedicated social cause. Both entities exist to provide support for targeted markets where operating income is applied to cover cost of operations, and excess income (profits) are 100% reinvested to sustain growth and expansion of the social enterprise. The most obvious difference between the SOHO for-profit enterprise, and nonprofit charities, is taxable income. SOHO will pay tax on property and profits, where non-profit entities operate tax free. But those same non-profit corporate entities are burdened with regulatory strings attached that are not favorable to the majority of current cost burdened families. Restrictions on how non-profit entities must conduct their business, and who gets excluded from charitable efforts, pose a greater threat to success of the SOHO Social Enterprise than federal and state taxes the enterprise is agreeable to pay. SOHO is designed to serve much greater numbers of cost burdened families than IRS nonprofit regulations allow. SOHO Social Network The SOHO Social Network (SSN) enterprise application will be deployed on an existing commercial blockchain network. SSN will incorporate a side-chained enterprise application operating 24 hours per day year round. SSN network users are not required to participate in network activities. Nether are T1 users required to contribute to the SOHO AHREIT portfolio fund. T2 and T3 contributors will be issued token mining permits containing total tokens equal to total USD amount contributed to the SOHO AHREIT fund. SSN will function as a permissioned, social network made available to SOHO sponsors under terms of a network licensing agreement. Access to SSN will be free for all who wish to participate. SSN will utilize a three tiered user structure with tier level activities shown below: 6

8 T1 - SSN Network Users Free Network Access Ad mining only T2 - SOHO Contributors Contributors to the AHREIT Fund less than the T2 minimum. Ad mining Permit mining Property offerings T3 - SSN Inviting Sponsors Contributors to the AHREIT Fund greater than the T3 minimum. Ad mining Permit mining Property offerings Property listings Invitation Bonus Tokens SSN user accounts will be accessible through personal web portals, (think Facebook user home page). Private passwords will be assigned to access SSN user accounts. SSN network activities will include: Advertisement mining User interaction with Ads shown on network pages. Network permit mining. Posting text, photos, videos. Commenting on posts of friends and family. Liking posts. Sharing posts. Making network friends. Participating in network interest groups. Property offerings. Residential properties offered by T2 & T3 users to the SOHO property acquisitions team. Property listings. SSN network listings of seller approved property purchase agreements. T3 status only. 7

9 Use of the SSN network will be offered as licensed rights to invited network users and contributing sponsors. There will be no monetary cost to access, use, or participate in SSN activities at the T1 level. T2 & T3 user levels require minimum contributions to the SOHO AHREIT fund which entitles those user to enhanced mining activities and T3 bonus tokens. User participation in network activities produces Return On Participation (ROP) token results. SOHO Private Equity SREITs SREITs (plural) will be funded by SOHO token owners who wish to turn some, or all of their mined crypto-assets into income producing real estate assets. SREITs will be offered for investment under Title IV, Regulation A+, Type II of the 2012 American JOBS Act (SEC, 2015). Regulation A+, Type II securities offerings allows anyone in the world, rich or poor, to invest in private offerings of U.S. securities up to a maximum annual amount of $50 million for each offering. SREIT shareholders will receive rental income from SREIT residential rental properties, as well as equity share ownership in all properties added to each SREIT portfolio. Soho will add new SREITs in different geographical locations to keep pace with Soho social network growth. SOHO crypto-assets will be the only currency units accepted for SREIT share ownership. SREIT ownership therefore will be derived as a function of total crypto-assets submitted by asset owners (numerical count), rather than crypto-asset market value on the day of transference. SREIT shares convey equity share ownership, and shared monthly rental income from all SREIT properties. SREIT shares will be market valued at (1) crypto-asset equals (1) SREIT share. Crypto-asset market value may vary based on market forces. The resulting future value (FV) for each newly generated crypto-asset, will be present day SREIT market share value, expressed as market value of total crypto-assets plus total real estate value generation produced by SREIT operations. As market value of crypto-assets and/or real estate rise and fall, so too will market value of SREIT shares rise and fall. A process no different than any other equity REIT venture, with one major exception: SREIT share value will be a function of crypto-asset market value + total real estate value generation (net asset value + funds from operations), rather than total real estate value generation alone, which underpins share value of every other equity REIT venture both public and privately operated. 8

10 SREITs will begin purchase of residential real estate properties offered by T2 & T3 users from the existing pool of 17,550,000 million vacant U.S. homes. Additionally, real estate developers and independent home builder/manufactures who agree to accept crypto-assets as the transactional currency, will sell new homes to help grow the SOHO AHREIT portfolio. SOHO Property Management Inc. and SOHO Acquisitions Inc. will provide professional management services to both the SOHO AHREIT and SREITs. Management fee structures common to existing private REIT organizations will be severely cut for SREITs. Cost saving advantages of blockchain technology, which underpins all SOHO network operations, allow lesser fee structures than conventional REIT management services are willing to provide. SOHO will charge no entry, exit, or transaction fees to SREIT shareholders. SREIT shareholders wishing to exit their positions may sell or trade those positions at any time of their choosing. No broker fees or other bundled costs common to private REITs will exist for SREIT shareholders. All activities pertaining to the SOHO AHREIT, Social Network, and SREIT operations will be conducted on the common SOHO blockchain network, using smart contract programs to automate virtually all operational functions of the greater SOHO Social Enterprise. SSN network activities will sustain growth of the SOHO AHREIT fund. The SSN network is designed as an innovative tool to incentivize social sponsorship to create and sustain growth of affordable housing supplies for global markets. SOHO Utility Tokens SOHO utility tokens will be mined by network users during network activities as previously described. Miner participation in network activities offers varying rewards based on each miner s individual ROP efforts. Utility tokens can not be removed from the network for off-network purposes. However, T2 & T3 sponsors are free to sell or trade mining permits within the SSN network. Each permit will show the balance of mined and unmined tokens remaining at any given time. A blockchain controlling smart contract will manage mining permit transfers between network miners through network portals. SOHO mining permits will be priced at whatever value the seller and buyer agree to. All sales will be final. 9

11 The value proposition for network ROP, will be ownership of crypto-assets. Crypto-assets become the property of network miners, and can be removed from the network if a crypto-asset owner so chooses. Phase III of the SSN ROP strategy discusses how crypto-asset monetary value may be realized for SREIT shareholders. Securitized Crypto-Assets Crypto-assets will be created following property purchases by SOHO for the AHREIT. Total crypto-assets assigned to each property will equal the USD purchase price. Crypto-assets will be deposited into network users accounts following the the Crypto-asset Distribution Protocol which includes the following input values: Total utility tokens in circulation: Total of all utility tokens held in all personal accounts. Total utility tokens in individual network user accounts. The number of Soho tokens held at the time of property purchase by each individual network user in turn. The formula for crypto-asset distribution is: Network miner utility tokens by total utility tokens in circulation * property purchase price. Example #1: T2 User User #1 holds 10,000 utility tokens in his mined token account. Total utility tokens in circulation = 50,000,000 10,000 50,000,000 =.0002% Property purchase price = $200, ,000 *.0002 = 40 Crypto-assets User #1 will receive 40 Crypto-assets deposited to his mining account. 40 utility tokens will be removed from user #1 s mined token account and returned to the Soho utility token mining pool. Example #2: T3 User User #2 holds 20,000,000 utility tokens in her minded token account. Total utility tokens in circulation = 50,000,000 20,000,000 50,000,000 = 40% Property purchase price = $200, ,000 * 40% = 80,000 Crypto-assets User #2 will receive 80,000 crypto-assets deposited to her mining account. 10

12 80,000 Soho tokens will be removed from user #2 s mined token account and returned to the Soho token mining pool. Example #3: T1 User User #3 holds 2000 utility tokens in his mined token account. Total utility tokens in circulation = 50,000, ,000,000 =.00004% Property purchase price = $200, ,000 * = 8 Crypto-assets User #3 will receive 8 Crypto-assets deposited to his mining account. 8 Soho tokens will be removed from user #3 s mined token account and returned to the Soho token mining pool. Crypto-assets will be proportionally distributed to all network users based on current production value of their individual mining activities. T2 & T3 miners who contribute directly to the SOHO portfolio fund, will hold X number of tokens in their mining permits equal to the contribution sum total. The greater the direct contribution amount is, the more utility tokens T2 & T3 miners will be able to add to their mined token accounts. T1 token miners (free network users) who have not contributed directly to the SOHO portfolio fund, will be able to mine ad tokens only. Although Ad mining will be the least productive of all mining activities, low income network users will be able to mine utility tokens for conversion into Crypto-assets following each new property purchase. Portfolio Property Offerings The St. Louis branch of the Federal Reserve Bank (FRED) (2017) reported that as of 2nd quarter 2017, vacant residential housing in the U.S. stands at 17,550,000 empty properties. The FED s findings indicate there is no shortage of eligible residential properties that can be offered to SSN, and purchased by the SOHO acquisitions team. Properties added to the SOHO AHREIT fund will be purchased by the SOHO acquisitions team using sponsor contributed funds. Prospective portfolio properties can be offered by T2 & T3 network users who personally own a property for sale, know of someone who does, or arranges a purchase discussion between a seller and the SOHO acquisitions team. Participating property sellers must sign property purchase agreements with SOHO at a mutually agreed price. Seller s will acknowledge the offering user in the purchase agreement. 11

13 Property sellers can also offer properties to SOHO directly, if they are registered network miners. If properties offered to SOHO result in a signed purchase agreement, the offering T2/T3 Users will have successfully mined utility tokens equal to 5% of the property purchase price. Example: $200,000 * 5% = 10,000 utility tokens. If after proper due diligence a contracted property is approved for listing on the SSN network, the offering T3 miner will have successfully mined an additional 5% of the property s purchase price. Example: $200,000 * 5% = 10,000 tokens, for a combined total of 20,000 utility tokens. In all cases, total tokens mined from a property offering may not exceed total utility tokens contained within the offering user s validated mining permit. The rationale for matching activity mining maximums to mining permit amounts is one of economic viability. SOHO cannot purchase new AH properties unless there are adequate funds available in the SOHO AH portfolio fund. Advertisements on the social network generate revenue for the SOHO AH portfolio fund. The network matches that revenue to miner activity in all three tiers. By doing so, T1 miners may participate for free while adding utility tokens to their mined token accounts. T2 & T3 miners also benefit from Ad mining as a supplement to permit mining when permit totals run low or are extinguished. There are no requirements for network miners to participation in network events. However, network miners will not realize any token benefit from network activities if they choose not to participate. Utility tokens must be mined by individual network users to be eligible for Crypto-asset distributions. Portfolio Property Acquisitions Information on all properties listed on the SSN network will be available to network users on their network portals. Portfolio properties will be purchased by the SOHO acquisitions team using SOHO AHREIT reserve funds. A fee simple deed for each newly purchased portfolio property will be singularly owned by SOHO. Upon settlement of property purchases, and completion of any needed repairs or remodels, portfolio properties will be placed into rental service managed by the SOHO property management team. 12

14 Portfolio Growth Projections The growth model for the SOHO portfolio, projects an initial acquisitions milestone of 100,000 housing units annually. The majority of properties purchased, will be existing homes and apartments in established communities. Newly constructed housing, that fall within range of the sq.ft./cost protocol of qualified applicant incomes, will also be added to the portfolio mix. Housing priced above or below the sq.ft./cost protocol range will be ineligible for network listing. Theoretical limits of residential properties purchased by SOHO rest on four primary factors: 1. Availability of properties 2. Availability of funds 3. Availability of closing representatives 4. Network throughput Availability of Properties: This should be a relative non-issue considering the vacant housing supply of 17,550,000 identified in the 2017 FED report. Secondly, the ability of network miners to quickly grow their mined token accounts by finding and offering housing properties to the network, is strong motivation for large numbers of SOHO sponsors to actively search for homes to offer the network. Availability of Funds: Adequate funding is directly connected to the number of active contributing sponsors. In order to grow the social network in proportion to growth projections, a marketing plan is being developed to involve celebrity and influential endorsers who have large fan followings. Those endorsers would publicly support SOHO s affordable housing cause, and challenge their followers to join the SOHO crowdfunding movement, and subsequently become active crypto-asset miners on the Soho Social Network. Endorsers would receive residual compensation from the network tied to the success of their efforts to deliver motivated followers, and associated crypto-asset mining production. Availability of Closing Representatives: Trained personnel consisting largely of licensed realtors in target markets will be needed to represent SOHO at property closings. Service providers will be compensated by SOHO at rates befitting the scope and frequency in which services are rendered. Such services will in time, be replaced by controlling smart contract operations. Change to a smart contract model will occur when real estate related blockchain services reach a state of market readiness. Network Throughput: A commercial blockchain network provider will be selected for SOHO Enterprise operations based on technological design, and transactional throughput that 13

15 conforms to a multiple of projected need of the SOHO network at maximally envisioned operational loads. The bulk of network throughput for SOHO Enterprise daily operations, will occur on the side-chained enterprise application, developed in conjunction with a blockchain network development team selected for the SOHO project. Rental Revenues All property related transactions, will be added to the blockchain distributed ledger for historical tracking of financial accounting, property management, property maintenance, taxes, insurance, and rental income revenues. Rental clients will be added to respective property records where monthly payments will be billed and received under agreed terms of a controlling smart contract program. Rental revenues from all portfolio properties, will accrue into the SOHO enterprise general operations fund to pay for budgeted enterprise activities. Rental revenue in excess of budgeted amounts will be transferred monthly into the AHREIT reserve fund. Zero net profits will be realized from SOHO AH operations. Real Estate Assets SOHO AHREIT portfolio property assets will be singularly owned by the Social Housing Enterprise, Inc., and accrue to the long term benefit and interest of the SOHO affordable housing social welfare cause. REIT Property Management The property management role within the SOHO social enterprise, is a critical function to ensure smooth and effective client relations, and lasting protection of fixed asset value. Administrative duties relating to setting and collecting rents, finding and screening tenants, executing rental agreements, budgetary and records management, accounting, taxes, insurance, and common legal issues will all be relegated to blockchain smart contract control. Property inspections, maintenance and repairs, market readiness, and ancillary issues related to given localities, will be assigned to trained SOHO property management agents; many of whom will also be SSN network users, and SOHO rental clients living in neighboring communities. Tokenization of independent contractor service fees paid to SOHO trained field agents, will become a useful tool that helps to improve lives and foster financial growth for cost burdened families. 14

16 Initial Coin Offering (ICO) ICOs have become a popular, if somewhat controversial, method for startup blockchain ventures to raise development funds. SOHO will forego that practice in favor of a more organic, grass roots methodology. SSN blockchain development will be funded from network operational revenues consisting of advertisement revenue and network user contributions. ROP Three Phase Strategy The SSN network rests at the heart of SOHO s affordable housing social welfare cause. The permissioned social network will rely on state of the art blockchain technology to accomplish SOHO organizational goals. As user participation in SSN activities reaches critical mass, availability of quality AHREIT affordable housing will dramatically increase in U.S. markets. Key to the SOHO Solution is active SOHO sponsor participation in SSN network activities. Without a network of active SOHO sponsors, there will be no portfolio property growth. SOHO sponsors will become the life s blood of SSN network operations, and as such, they must be protected and served in keeping with value they represent to SOHO s social enterprise goals. The three phased ROP strategy will ensure that value long term. Phase I: Funding 15

17 Residential property acquisitions by SOHO will require large cash reserves to purchase multiple properties daily. The SOHO acquisitions team will settle property purchase transactions in cash using zero mortgage financing. Ongoing SOHO sponsorship will generate necessary capital to fuel growth of the SOHO AHREIT, and expand operations of the SSN social network. Phase II: Network Activities The SSN network offers opportunity to SOHO sponsors to participate in network activities for the principal benefit of the SOHO affordable housing social welfare cause. Network user participation involves token mining to qualify for Crypto-asset distributions. Crypto-asset production is entirely dependent on each network user s individual participation in network activities. There will be no benefit to SSN network users other than how users choose to participate in network activities. However, for network users who do participate, accumulation of mined Crypto-asset could prove significant over time. Phase III: SREIT Operations 16

18 Public demand to participate and benefit from SSN network activities, will fuel network growth, and subsequently portfolio growth, through sponsor contributions to the SOHO portfolio fund. Network users holding Crypto-asset, will seek to capitalize on accumulated asset value relative to total Crypto-asset owned. Within the SSN network, all utility tokens will have zero monetary value by design. Officially, they are utility instruments of transactional value to facilitate participation in SSN network activities. Outside the confines and control of SSN network use, Crypto-asset may have monetary value for Crypto-asset owners based on open market supply and demand economic forces. Speculation of Crypto-asset market value is common to all instruments of transactional value (including fiat currencies). Mined Crypto-assets can offer tangible value for SSN network users in the form of fixed asset real estate acquired with Crypto-assets in external markets. 17

19 To realize open market asset potential for Crypto-asset owners, all that s needed are willing sellers who ascribe monetary value to Crypto-assets, and agree to an exchange of property in which Crypto-assets are traded at fair market value for fee simple ownership of select real estate properties. Purchases of real estate property using Bitcoins as the transaction currency, is a new market phenomenon gaining notable financial attention around the world. Successful Bitcoin real estate transactions are widely reported in blockchain industry news media. Facilitating large numbers of real estate purchases using SOHO Crypto-assets rather than Bitcoin, can be easily accomplished by pooling Crypto-assets in SREITs specifically created to serve SSN Crypto-asset owners. 18

20 Crypto-Asset Value Within the SSN network utility tokens will hold a representative value equal to one (1) U.S. dollar. For every dollar contributed to the SOHO AH fund, one utility token will be added to the contributor s mining permit. For every offered property, one (1) Crypto-asset will mined for each dollar of the property s purchase price. Outside the confines and control of the SSN network, market forces may determine Crypto-asset value to be something quite different. Mined Crypto-assets pooled in SREIT share ownership is believed to be a sustainable method to produce ongoing income and equity share value for SREIT shareholders. What supports that statement? When we look at any instrument of transactional value we commonly check for underlying fixed assets that supports fair market value. In the case of major fiat currency (money) such as USD, EUR, CAD, AUD, JPY, CHF...etc, and crypto-assets like Bitcoin, Ether, and others, we find there are zero underlying assets. What then supports market value for those currencies? In general terms, the true value of currencies lie in the good intentions of overspending governments; hands in our pocket politicians; and private individuals who believe that perhaps one day Bitcoin will rule the financial world. Perhaps one day it will, but for today, naysayers find little true value in unbacked financial instruments. So why should we expect Soho Crypto-assets will offer anything more substantial than unbacked financial instruments? The answer lies in the future value (FV) home builders, real estate developers, and home sellers receive when they trade real estate properties for Crypto-assets of equal present value. Let s go back to our example of a $200,000 new home where Crypto-asset market value is $1.00. The SREIT trades the home seller 200,000 Crypto-assets for a new $200,000 house. The SREIT now owns a $200,000 market valued rental property, and the seller owns 200,000 Crypto-assets of equal current market value. What options will sellers have to turn 200,000 Crypto-assets into hard cash to pay for construction costs, interim financing costs, and make a reasonable business ROI? Four options the Seller can choose are presented below with accompany details: The analogies that follow are simplistic by design, these points should be made so that anyone interested in the SOHO Social Network offering will have a good understanding of crypto-asset transaction concepts. 19

21 Option #1: The seller can exchange Crypto-assets for USD at market value through any crypto-exchange that trades SOHO Crypto-assets as part of their crypto portfolio. There are many such crypto exchanges doing business today, with more to come as new crypto assets come to market around the world. Why didn t the SREIT management just exchange Crypto-assets for USD, and pay the seller in dollars? The applied reasoning lies in future value (FV) of Crypto-assets as monetary instruments of transactional value. The next three options will clarify that decision. Option #2: Home sellers can invest some or all of their Crypto-assets in SREIT operations, and become equity shareholders along with SOHO sponsors; the majority of whom are investing Crypto-assets in SREITs to grow a revenue generating portfolio. Why would a Seller want to invest his Crypto-assets in SREITs? As with other legitimate crypto-assets, there is a valid expectation that over time SOHO Crypto-assets will increase in market value; if for no other reason than each single Crypto-asset will be backed by fixed real estate. As each new property enters the SREIT portfolio, the value of underlying real estate assets will grow in size supporting higher market valuation of SREIT shares, and Crypto-assets the SREIT is holding for new real estate purchases. Crypto-assets held by private owners outside the SREIT environment will also benefit from increased market valuation. The SOHO acquisitions team will assist home builders to recognize that contracting with the SREIT to purchase all the homes they can produce, offers a much greater financial opportunity when looking at FV of real estate backed Crypto-assets. Option #3: Sellers may choose to become SOHO sponsors and contribute some or all of their Crypto-assets to the SOHO property portfolio fund. Why would home sellers want to become SOHO contributing sponsors when they already have a large number of Crypto-assets in their wallets? The SOHO acquisitions team will advise sellers on the merits of Crypto-asset mining, so that over time they can increase total Crypto-assets they hold at much faster rates if Crypto-asset market value rises from its initial price. 20

22 Let s talk about Crypto-asset current market value. What was Bitcoin current market value the last time you looked? At the time of this writing Bitcoins are worth approximately $9,000 each. What is the fundamental difference between a SOHO Crypto-asset and a Bitcoin? Absolutely nothing, other than the underlying real estate value for SOHO Crypto-assets, the greater difficulty and higher cost of mining Bitcoins, and market perceptions of Bitcoin market value. Bitcoins have zero underlying value; they are only worth what the market says they re worth. SOHO Crypto-assets will have fix asset real estate value that grows as SREIT, the SSN network, and the SOHO Social Housing Enterprise grows. Option #4: We could keep going but let s wrap Seller options up here. The best option for the seller may be to combine options 1, 2, and 3 and profit from Crypto-asset FV as a miner, an investor, and a home builder getting top dollar for as many new homes the company can construct. Crypto-assets are not cash, the Builder/Developer needs cash to pay for the high cost of new home construction. Correct...but let s address that by looking at what may happen to the price of Crypto-assets over time, and how Crypto-asset FV changes the valuation dynamic of the entire SOHO Social Enterprise. Because of the underlying fixed asset value of real estate, Crypto-assets will hold market value equal or greater than the associated real estate assets. The greater the number and market value of real estate properties SREITs own, the higher market value of Crypto-assets will rise. Why? Because free market value of Crypto-assets is not directly tied to the market value of the underlying real estate. Real estate acts as a floor for Crypto-asset market value.not the ceiling. Market value of transactional instruments vary based on marketplace bid and ask prices. Fundamentals aside, why do stocks rise and fall? Why do world currencies (Forex) spike and fall 24 hours a day. The answer is that people speculate on FV of transactional instruments. The brighter FV is for any instrument, the more likely current market value will rise. Let s go back to the source of Crypto-asset generation as mentioned above. SOHO Crypto-assets are mined in numbers equal to the sale price of the property they were 21

23 originally assigned to. If the property sells for $200,000 there will be 200,000 Crypto-assets distributed. The 1:1 ratio between sale price and Crypto-assets mined will remain fixed within the SSN network, regardless of what Crypto-asset market value is at any given moment outside the SSN. In that scenario, who benefits from appreciating Crypto-asset market value? The beneficiaries are people that mine Crypto-assets, SREIT shareholders, SOHO, and SOHO contributing sponsors. Example: If a Crypto-asset is worth a dollar, it will buy $1 dollars worth of real estate. If Crypto-asset value doubles to $2.00, one (1) Crypto-asset will buy $2 worth of real estate. Buying a $200,000 house with $1 Crypto-assets cost 200,000 Crypto-assets. Buy that same house for $200,000 with $2 Crypto-assets will only cost 100,000 Crypto-assets. You can purchase two (2) houses for the price of one at $2 Crypto-assets valuation. For every increase in Crypto-asset market value, more houses can be bought with fewer Crypto-assets. That doesn t happen with fiat currencies like US dollars. The market value of the house is tied to dollars not Crypto-assets. If one transactional instrument can buy twice as much as a different instrument can buy, people will pay more to hold the higher valued instrument. That s why people trade Forex around the clock, they re betting on fiat currency FV. Let s look at how Crypto-asset FV affects SOHO. The same scenario occurs once again. If SOHO sponsors (or builder/developers) contribute $2.00 Crypto-assets to SOHO, the Social Enterprise can buy twice as many houses with the higher market value Crypto-assets. SOHO may need to convert the Crypto-assets to cash before individual home sellers agree to the deal, but not necessarily. The SOHO acquisitions team will also be educating private home sellers on the value of mining Crypto-assets instead of demanding all cash for their home. Some will trade for Crypto-assets...some will accept a cash/crypto mix,...and some will demand cash. Consider SOHO sponsors who contribute Crypto-assets to the social enterprise. A sponsor s mining permit will allow 2X as many utility tokens to be mined for a $2.00 Crypto-asset than a $1.00 Crypto-asset. The higher Crypto-asset market value rises 22

24 outside the network, the more utility tokens network users can mine inside the network. In this scenario, where Crypto-assets market value is on the rise, a better strategy might be to buy SREIT shares with half the Crypto-assets mined to lock in equity ownership of real estate assets, then reinvest their remaining higher valued Crypto-assets back into mining new utility tokens at whatever price multiple Crypto-assets have in external markets. Why SOHO Ma ers The principal reason why SOHO s social mission should matter to people from every walk of life, is the knowledge that global societies are teetering on the edge of unsustainable housing costs for low income populations. The ongoing failure of world governments to provide affordable access to decent housing as a basic human need, is a recipe for deeply troubled times ahead. Financial disparities between social classes today, threaten our ability to provide the most basic human needs to retain our dignity during economical downturns. We don t need handouts or government subsidies, we need free market opportunity that matches our individual ability to provide for our family s well being. Spending the majority of what most earn to keep a simple roof over their heads is not opportunity, it s a virtual prison that limits our ability to make a better life possible for ourselves and those who follow in our footsteps. If we want positive outcomes in life, financial or otherwise, we must look within ourselves and ask the question...what can I do to make a difference for myself, my family, and my community. Find a social cause and make it your mission to effect positive outcomes. Affordable housing is SOHO s social welfare cause, and with your help we can make a better life for millions of families in need of positive outcomes. SOHO offers a social welfare solution that can make socially responsible efforts beneficial to others, and profitable to those of us who actively participate in SSN network activities. Next Steps SOHO is exploring all avenues to field the best possible ensemble of industry talent to bring the SOHO blockchain social network online. We are interested in creating mutually beneficial relationships with blockchain network providers, blockchain enterprise application developers, 23

25 public relations specialists, and legal counsel experienced in blockchain startup regulatory compliance. We can change the future of the affordable housing industry if we work together to adopt the most effective model for global expansion efforts. If you are interested in exploring options for a professional relationship with the Social Housing Enterprise, please contact me. I will promptly respond to all good faith inquires. God bless Terry L. Peterson Social Entrepreneur Social Housing Enterprise, Inc. Mr. Peterson s career background spans 35 years in the fields of construction management and real estate development. He is an honored alumni of Colorado State University Global Campus, and holds dual Master of Science degrees in Organizational Leadership and Management, with specializations in Strategic Product Innovation, and Managing Dynamic Environments. Terry is also designer, and intellectual property holder for an ultra high performance concrete (UHPC) precast modular building system for manufacture and construction of affordable housing for global markets. 24

26 Glossary Affordable Housing Blockchain Cryptocurrency Social Innovation Social Welfare Individual Social Responsibility (ISR) Social Entrepreneurial For-Profit, Philanthropy Residential housing that cost an occupant family no more than 30% of total family annual income. Annual income * 30% / 12 months, equals monthly housing costs for an individual or family unit. A digital ledger on a decentralized computer network in which transactions made in cryptocurrency are recorded chronologically and publicly observable. A decentralized digital currency in which encryption techniques are used to regulate the generation of units of currency, and verify the transfer of funds that operate independently of a central bank. Cryptocurrencies provide an outlet for personal wealth that is beyond restriction and confiscation. Social innovation is the process of developing and deploying effectiv solutions to challenging and often systemic social issues in support of societal progress. The well-being of the entire society. Social welfare is not the same as a standard of living, but is more concerned with the quality of lif that includes factors such as affordable housing costs. ISR includes the engagement of each person towards local or globa communities, which can be expressed as an interest in actively participating to solve critical social welfare problems. Social entrepreneur is a leader or pragmatic visionary who achieves large scale, systemic and sustainable social change through a new invention, technologies, or strategic planning of organization affairs. Non-profit philanthropy is quest to do good things for society that stems from a personal desire to give back for the greater good. For-profit philanthropy is simply a means to accomplish that same goal, without the heavy hand of governmental authority controlling 25

27 who may, and who may not benefit from SOHO philanthropic efforts SOHO SOHO Sponsorship SOHO Property Portfolio SOHO Property Portfolio Fund SOHO Economy SSN SSN Social Network SSN Users The Social Housing Enterprise, Inc. Compassionate individuals in the public at large who contribute funds to SOHO for growth of affordable housing supplies for cost burdened families. SSN network activities for SOHO sponsors can provide generous personal benefits to all SSN users. Residential housing purchased by SOHO that is owned, operated, an managed as affordable rental properties. SOHO properties will be made available to qualified families at rental rates consistent with the HUD 30% threshold for housing affordability. A cryptographically secured, digital monetary fund establish for purchase of residential housing to grow the SOHO portfolio of affordable housing properties. A circular economy in which Prop tokens are the value proposition for all SOHO activities. Props mined in the SSN network can be exchanged for SREIT share ownership. SREITs will purchase real estate properties with Prop tokens at respective market value. Prop held outside SSN and SREITS, may be reinvested with SREITs, or contributed to SOHO to help grow the affordable housing portfolio. Props contributed to SOHO will increase mining permit token quantities. The cycle repeats in a closed loop constituting a circular economy. The SOHO Social Network, Inc. A true social network that allows SSN users to communicate with other SSN users through posts, comments, pictures, and private messaging as currently found on Facebook and other commercial social networks. Users participation in SSN network activities unfold as multiple processes for SOHO and Prop token mining. SOHO sponsors who join the SSN social network to participate in 26

28 socially beneficial network activities. SSN users individually mine SOHO tokens for personal benefit. SSN Mining Permit SOHO Tokens Prop Tokens Bonus Tokens Property Offerings Return on Participation (ROP) Mortgage Interest Fees A digitally secured user account that contains record of a SOHO sponsor s social contribution to the SOHO property portfolio fund. A SSN mining permit authorizes a SSN user to mine SOHO tokens equal to the SOHO contribution amount. No limits apply to contribution size, but mined tokens will never exceed the SOHO contribution amount. Mined token limits will increase with each new SOHO contribution by a SSN permit holder. Digital utility instruments of transactional value each user accumulates by individual mining efforts during network activities. SOHO tokens have no monetary value on the SSN social network. SOHO tokens can not be removed from the SSN network. Digital crypto tokens that network miners accumulate through toke distributions follow each property purchase.. Props become the private personal property of SSN users. Props have no monetary value on the SSN social network. Props can be downloaded into a digital wallet and removed from the SSN network. Bonus tokens will be added to network user mining permits following property offerings and listing. T3 users also receive bonus tokens equal to their invitees first month of token mining productio Properties offered to SOHO by network users for purchase by the SOHO property acquisitions team. Property offerings are a lucrative way to mine SOHO tokens. The net results of network user participation in SSN network activities. Props are the net ROP benefit of SSN network participation. Props hold no monetary value on the SSN network, bu off network Props may well offer substantial benefits to Prop owne The price paid to mortgage lenders for award of a home purchase loan. Total mortgage interest fees are a product of purchase price, 27

29 fixed interest rate, and term for repayment. The SSN applies FHA mortgage loan interest rates and a 30 year term to calculate bonus token distributions. Rental Revenues Real Estate Assets PRI Loan SREITs Title IV Regulation A+ Type II of the 2012 JOBS Act The sum of money received monthly by SOHO from rental clients who occupy SOHO rental properties. SOHO operation costs are paid from rental revenues. Rental revenues in excess of budgeted operating cost will be transferred into the SOHO property portfolio fund. SOHO portfolio properties are are singularly owned by SOHO under fee simple deed conveyances. The SOHO property portfolio fund is the single source of funds for all property purchases. Program Related Investment loan. SOHO will issue a interest bearin PRI development loan to SSN for budgeted final development costs of the SSN blockchain enterprise application. The PRI will be repaid with interest to SOHO by the SSN developer. Private real estate investment trusts (SREITs). SREIT(s) will offer shares to Prop owners in exchange for Prop tokens. SREITs will purchase and manage residential properties for rental revenue generation, to be proportionally distributed to SREIT shareholders o a monthly basis. Title IV allows startups and later stage pre IPO companies to use equity crowdfunding platforms to raise investment capital from bot accredited and non-accredited investors. SOHO will offer shares in SREITs to Prop token owners. 28