In the spirit of fair distribution, where we want every user to have the same chance to participate in the fundraising and purchasing of real estate, we are introducing prefunds to the platform.
The Essence of Prefund
Prefund gives each investor the guarantee to participate in the purchasing of a given property, regardless of how many other interested investors there are. This means that everyone that joins the prefunds will have a guaranteed allocation of their funds in the fundraiser for a given property.
The Operation of the Prefund
The prefund is divided into 2 main functionalities, namely:
- Depositing/withdrawing a deposit
- Participating in the prefund of a specific property
Each user on the platform is able to contribute their funds into the smart contract at any time. They are also able to top-up or increase their share of the fund by depositing more if they would like to. Users are not required to have passed any prior requirements (eg. KYC). As such, the smart contract will also not validate the users making a deposit. The deposit can be used in the prefund for a given property, or remain in escrow until paid out.
Withdrawing from the smart contract is blocked during the active period of the prefund. This means that when a new property’s prefund goes live, all capital is placed in escrow until the period is over.
The deposit is one per user. If a user decides to use their deposit for a prefund the deposit will be reduced by the number of shares purchased in the prefund. The deposit is shared by all prefunds. The reduction in the prefund will take place once the prefund period is over, once it becomes known how many RPTs the user will get in the given property.
There is an additional fee of 1 $UST per deposit/withdrawal transaction.
Real Estate Prefund
The real estate prefund precedes the normal fundraising for the property, and lasts for a specified period of time. To participate in the prefund, the user must meet the following requirements:
- Users must have a fully verified account on the Terra Land platform, consisting of a verified wallet on the platform, a verified wallet on the blockchain, and passing KYC, have a minimum amount of $UST deposited into the prefund smart contract dependent on each specific real estate
- Sign an electronic agreement confirming the participation in the prefund, which is signed automatically through the Terra Land platform through the use of a wallet
The user can purchase either a maximum of 40% when there are multiple owners, or all 100%. When the user signs the agreement, the entire deposit participates in the prefund.
In the event that more than 100% of the needed funds for a property gets raised in the prefund stage, each participant in the prefund gets a proportional reduction in their amount of allocation (eg. if 120% of the necessary funds get raised, each participant has 20% of their allocation reduced). The reduced funds remain in the deposit and can be withdrawn by the user, or left for other future prefunds.
In the event that less than 100% of the needed funds for a property gets raised, the normal fundraising begins where everyone can participate. Prefund investors will receive their share of Real Property Tokens, just like in a normal fundraising.
The prefund mechanism will be introduced in the upcoming property, starting this Thursday 14th of April at 12 PM CET.