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White Paper – Buying and Selling London Properties with Bitcoin

Confidential. © Copyright Universal TrustMe Engine Limited 2017

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BUYING AND SELLING LONDON PROPERTIES WITH BITCOIN

TrustMe™(Universal TrustMe Engine Limited)





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DisclaimerThis document is a white paper setting out the current position. It is not a prospectus and does not constitute an invitation to invest. It is for background information only and represents the current stage in the development of the concept that it describes. Its contents are subject to change and any subsequent prospectus will be issued on the basis of any revisions or changes.

Potential investors should not treat the contents of this white paper as advice relating to legal, taxation, investment or any other matters and are recommended to consult their own professional advisers concerning the acquisition, holding or disposal of property certificates once they become available.

Prospective investors should inform themselves as to (a) the legal requirements within their own countries of residence or domicile for the purchase or holding of Units; (b) any foreign exchange restrictions which may affect them; and (c) the income and other tax consequences which may apply in their own countries of residence or domicile relevant to the purchase, holding or disposal of property certificates.



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INTRODUCTION TO UK PROPERTY INVESTING ...........4

London Property Market in Context ................................................ 5

UK Property Rights ............................................................................. 7

Global Investment Demand .............................................................. 7

London Housing Market Dynamics ................................................. 9

Investment Opportunities ................................................................ 9

PROPERTY TRANSACTIONS .........................................10

Current Process for Buying or Selling UK Property ..................... 11

Marketing of Properties .................................................................. 11

Property Transaction Costs ............................................................ 11

Limitations of Current Property Selling Approach ....................... 12

LISTING A PROPERTY ON THE BLOCKCHAIN.............13

Blockchain Land Registry (‘BLR’) ..................................................... 15

Initial Property Listing ..................................................................... 15

Blockification of Property ............................................................... 15

PROPERTY ASSET TRADING VIA THE ‘TPX’ ................16

Trading of property certificates ..................................................... 19

New Asset Backed Financial Instruments and Engines ............... 19

Asset Integrity Management .......................................................... 19

BENEFITS TO THE PROPERTY MARKET .......................20

Seller Benefits ................................................................................... 21

Investor/Buyer Benefits .................................................................. 22

Financial and Political Benefits ....................................................... 22

CONCLUSIONS AND NEXT STEPS ...............................23

APPENDIX .....................................................................25

Select Additional Sources ................................................................ 26

About Universal TrustMe Engine Ltd. ............................................ 27

About the Blockchain Land Registry .............................................. 27

About the TrustMe Property Exchange ......................................... 27

Graphs to reproduce ....................................................................... 27

Contents



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INTRODUCTION TO UK PROPERTY INVESTING

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London Property Market in ContextThe UK property market is currently estimated to be worth between £6.8 trillion1 and £8.2 trillion2, having increased over £1.9 trillion over the past five years (a compound annual growth of 6.6%). In 2016 the London property market is estimated to have increased in value by £491 billion (7.8%)3 . Like most other developed markets, property in the UK is recognised as a key store of wealth. In the London housing market, property not only represents a home but a capital asset in the portfolios of both UK and international investors.

In 2016 London accounted for 11% of all property sales in England and Wales, but represented 23% of the total housing market value (total value of residential property transactions for an area)4.

London accounts for the largest portion of value and growth of the UK property market, especially with regard to prime housing. The prime housing market consists of the most desirable and aspirational properties by location, aesthetics, standards of accommodation and value. Typically, it comprises properties in the top 5% of the market by house price.

London’s population density is substantially higher than the rest of England, while Greater London is the most highly populated city in the European Union5 , and just behind top Asian cities. Prices in London are also significantly higher than those in the rest of the country. This is driven not only for the demand for housing, but by investors who perceive property from the London market to be an attractive addition to a broad investment portfolio.

1 “UK homes worth a record £6.8 trillion as private housing wealth exceeds £5 trillion” - Savills, 18 January 2017 (link)2 “Over £8 trillion - the total value of UK residential property in 2016” – International Business Times, 20 December 2016 (link)3 “The state of the UK housing market in five charts” – The Telegraph, 2 September 2016 (link)4 “House price statistics for small areas in England and Wales: year ending Dec 1995 to year ending Dec 2016”– Office for National Statistics (link)5 London’s Population Density, Encyclopedia Britanica (link)

Introduction to UK Property Investing

Wales South West

South East

London East West Midlands

East Midlands

Yorkshireand The Humber

North West

North East

Percentage of total housing market value and percentage of all property salesEnglish regions and Wales, 2016

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25%

Source: https://www.ons.gov.uk/peoplepopulationandcommunity/hous-ing/bulletins/housepricestatisticsforsmallareas/yearendingdec1995toyearendingdec2016, See xls dataset

Percentage of hmv Percentage of sale

Total UK housing market value and property sales by region



By its nature and process, the property market is not highly liquid and is subject to the macroeconomic environment and market trends. Over the past ten years the UK property market has been hit by recessions caused by the global Financial Services crisis and European sovereign debt crisis. More recently we have seen the market also hit by uncertainties related to the Brexit referendum. Average UK property prices declined during the global recession and took six years to return to previous levels. Pricing of homes in the 90th percentile was quickest to recover, and we have seen the gap continue to widen between the top and bottom ends of the market.

Sales volumes of the residential market are traditionally cyclical (most homes being placed on the market in Spring and Summer, when demand is highest and properties may appear most attractive). It is typical also for owners to hold off on selling their homes in weak macroeconomic conditions in the hope of seeing an increase the following year. As demand for London properties is not simply driven by the resident population, sales volumes are not solely tied to the local job market but are driven by comparisons to global investment alternatives.

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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Median property price paid in the 10th and 90th percentile of neighbourhoodsEngland and Wales, year ending Dec 1995 to year ending Dec 2016

£ millions

90th percentile 10th percentile

Source: https://www.ons.gov.uk/peoplepopulationandcommunity/hous-ing/bulletins/housepricestatisticsforsmallareas/yearendingdec1995toyearendingdec2016, See xls dataset

Total sales volume

Housing sales volatility in London 2000 to 2017

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15,000

10,000

5,000

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Jan2000 Jan2002 Jan2004 Jan2006 Jan2008 Jan2010 Jan2012 Jan2014 Jan2016 Jan2018

Source: http://landregistry.data.gov.uk/app/ukhpi/exploreContains public sector information licensed under the Open Government Licence v3.0. (http://ww-w.nationalarchives.gov.uk/doc/open-government-licence/version/3/)


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UK Property RightsThe origins of property rights and liabilities in the England & Wales date back to the Norman Conquest in 1066. In the United Kingdom it remains the legal case that only the Crown owns all land in England & Wales but the grant of estates in the land effectively provide “ownership”. The concept of owning an estate in land, as opposed to the land itself, has proved remarkably resilient and versatile. The law was consolidated in a series of Acts of Parliament in 1925 and the only major change relating to title since then has been the Land Registration Act 2002 which laid the foundations for the electronic transmission of title. Most titles are now registered at the Land Registry and the only evidence of title is the on-line register. This facilitates dealings in real property. Similar arrangements apply in Scotland and Northern Ireland which have their own registration systems

In 2016, 51.9% of voters in the UK European Union membership referendum opted in favour of the UK leaving the EU (commonly referred to as ‘Brexit’). With the subsequent invoking of Article 50 of the Treaty on European Union a two-year negotiation period for the UK’s withdrawal from the EU has been launched. The UK will maintain control over its rules regarding property in its territory as property rights in the UK cannot be dictated by future changes of legislation in the EU. These rights are part of English culture and remain protected. Nevertheless, the lack of certainty over the outcome of Brexit negotiations is expected to limit house price growth as buyers are reluctant to increase indebtedness6.

6 “The market’s change of gear” - Savills, 3 November 2016 (link)7 “In 2000, emerging economies accounted for a mere 12 percent of global wealth, but have contributed nearly 25 percent towards global growth since.” – The Global Wealth Report 2016, Credit Suisse (link)

Global Investment DemandOver the past two decades we have seen a boom in the middle class as global affluence has increased. This has been most notable in previously relatively impoverished regions such as parts of Asia Pacific (notably China)7. The success of new entrepreneurial ventures leveraging technology breakthroughs has led to the rise of a new global cohort of relatively young high net worth individuals who have years of investing ahead of them. As an example, taking just 1 percent of the Chinese population, this would mean approximately 14 million people are increasingly looking to where they can invest outside China to diversify their portfolios.

These investors are increasingly looking to solid investment opportunities in mature markets in Europe and North America. The London market has long been a favourite for global investors, and so is likely to attract these and other new funds. London is perceived as a secure place or ‘safe-haven’ to invest store money for foreign investors – especially with the currently weak pound sterling currency.

Asian and other investors seeking to diversify internationally, may also view investment in London as a secure means to guard against potential devaluation of their own local currencies (e.g., concerns regarding the Chinese yuan).

These trends combined have resulted in an ever larger and larger potential investor base for London property assets, especially if such assets are easily and securely tradeable.



Aside: The difference between property, money and currency.

Property, in terms of land and buildings is physically ‘fixed’ in its place, its value is mostly dependent on demand for its use. If demand

usage is increasing for the property, the value increases (demand inflation), likewise the

deflationary demand usage effects on value are also true. Property depending on where it

is located is also means to store value and can appreciate in value. Property is however difficult

and costly to use as a medium of exchange since the value is traditionally non-fungible and very

costly (in time and costs) to transfer. A great deal of its value is locked into the asset without being

able to generate further returns for its legal or beneficial owners (although financial institutions

and lenders do often use their part ownership of properties for their own value).

Money is ultimately an intangible concept. It cannot be seen or touched. It is used as a medium of exchange, unit of account, store of value and is divisible into smaller units. Gold and Silver are tangible representations of ‘money’ and they are a static store of value, typically not appreciating in absolute value and they are immune to monetary supply inflation by central banks and governments.

Currency is a medium of exchange, fungible and a unit of account. It is meant for very short term exchange of value. Currency usually depreciates continuously due to ongoing monetary supply inflation by central banks and governments, approximately at 2.5% per annum for mature western currencies.

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London Housing Market DynamicsLondon is highly regarded as an investment market. As indicated above, certain parts of London (considered ‘Prime London’ here) are often subject to the highest national and international demand and thus command the highest market pricing. According to Savills’ Research, five year returns on Prime London properties averaged 15.9% since 2011, with two districts accounting for most of this growth – Prime North & East and Prime South West (the largest prime market in London)8. Areas such as Mayfair and Notting Hill have reached such prices that they are often no longer easily affordable except by high net worth investors, leaving this part of London (and the high returns they command) out of reach for the average investor or most owner occupiers.

Over the past fifteen years, according to the Office for National Statistics, we have seen an increase in median house prices to median gross annual earnings. This became particularly marked in the London market following the global recession of 2007-2009, with this ratio reaching 12.88 for London compared to 7.72 for all of England and Wales9. As a result, home ownership in the capital is more challenging to achieve than elsewhere in the UK.

8 Five year returns on prime London property - Savills Research (link)9 Source: Office for National Statistics, Ratio of house price to residence-based earnings (lower quartile and median), 2002 to 2016

The London property market is as such a prime source of investment assets (property) for institutional and individual investors. There are limitations in investing in this type of asset versus investment alternatives. The primary issue is the fact that unless an investor purchases property certificates in a fund that invests in property assets, investors have limited options allowing them to invest in “part of” a property or easily trade such assets themselves once purchased. Thus, investors in highly prized property locations need (i) to have access to sufficient funds to be able to purchase the entirety of a property and (ii) have the investment horizon (time) to tie up such capital in such an asset to realise their anticipated returns.

Once invested in property, this type of asset is currently relatively illiquid (See Aside: The difference between property, money and currency). Despite high demand for property in the London market it is somewhat challenging for an investor to liquidate their property holding as this is dependent on the current property sales process which typically lasts 3-9 months – or even longer for premium value property assets.

An unusual feature of the high value London property market is the number of properties remaining empty after purchase. According to the London Council, 20,000 properties are long term vacant. It is worth noting that considering the location of many of these properties there would be plenty of rental demand for these properties, so they are not left empty due to lack of rental options. Currently houses are left empty for liquidity purposes. Owners are foregoing large potential rental income (e.g., 6-7% per annum). These investors are primarily interested in asset security, capital appreciation and liquidity.

Investment OpportunitiesIn practice as outlined above, certain types of investors are interested in investing in property in high demand locations in London but are then willing to relinquish rental income to avoid the complexity of ongoing maintenance of the property and the challenges of managing rental tenants. The security and gains on the property asset alone are sufficiently valuable to these investors. Such investors currently do not have other equivalent means of investing in London household property market without purchasing entire properties to maintain control of the asset and/or to hold the asset in a more liquid state to enable them to then sell the asset at a time of their own choosing (still with a 3-9 month wait to see the benefit). As a result, properties in highly sought after parts of London often remain empty of tenants under the current circumstances for investors.

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Median house price to gross annual earning

England London WalesSource: https://www.ons.gov.uk/peoplepopulationandcommunity/housing/-datasets/ratioofhousepricetoresidencebasedearningslowerquartileandmedian



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PROPERTY TRANSACTIONS

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Current Process for Buying or Selling UK PropertyThe current process for purchasing a residential property in the English market follows a multi-stage approach involving several key stakeholders (see table below). The timeline to offer and complete the sale of a London property can typically take three to nine months. Properties sold through this process, are most often sold in their entirety and those individuals or debt providers having any other claim on the property are then able to register a ‘charge’ or ‘lien’ on the property which must be resolved before the title of the property may be traded or reassigned in the future. Mortgages and their providers are therefore registered as a ‘charge’ rather than as a joint owner of a property.

Marketing of Properties The marketing of properties across the UK tends to be conducted locally targeted to an investor base already familiar with the market, though online marketing allows real estate agents to reach a global audience. Thus buyers tend to be local, UK-based, individuals or entities. Buyers are limited to those who can afford 100% of the purchase price.

Given the interest in London properties, these are in addition advertised more broadly to potential investors outside of the UK. This may be done by targeting certain investor populations such as those in Asia, the Middle East or North America. Certain investor groups have shown keen interest in parts of London and thus make an attractive investor base.

Property Transaction CostsCosts involved in the transaction include among other solicitors’ fees, agents’ fees, registration fee to HM Land Registry (to record sale), government stamp duties and surveyor’s reports. Typical costs are 5% of the value of the property, and can be higher for prime property. The 5% to 12% cost (relative to property listing value) is related to UK government stamp duty.

Seller Current property owner(s), an individual, trust or company controlling 100% of the property asset.

Buyer Individual(s), trust or company wishing to purchase 100% of the property asset.

Selling Agent Acting on behalf of the seller, lists the property for sale.

Solicitor for Seller

Trusted 3rd party acting on behalf of the seller, who ensures the sale transaction is completed in accordance with contract law.• Receives funds from the buyer and title from the seller and reassigns both on completion of transaction. • Conducts Anti-Money Laundering (AML), Know Your Customer (KYC) tests. • Checks liens on the property, including mortgage.

Solicitor for Buyer Acting on behalf of the buyer to verify contract terms, undertake appropriate due diligence (such as asking the local authority about, checking on any charges on the property and/or any known plans that could affect the value of the property) and integrity of the property under purchase.

HM Land Registry Holds electronic listing of property ownership.

Surveyor Performs and authenticates physical description of the property and reports on the overall physical condition of the property

Insurance company Provides hazard and title insurance (where needed), maintains asset integrity after the sale of the property.

Government entities Levies stamp duty, land tax.

Stakeholder Role

12%

5%

the typical property

transaction costs are

5 - 12% of the

value of the property

Property Transactions



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Limitations of Current Property Selling ApproachThe current market has led to three major issues:

Today, property owners who do not wish to sell their entire property cannot easily unleash property value except usually via a mortgage (re-mortgage) or equity release of their properties. Owners must assume increased debt levels whilst the mortgage issuer is making increased revenue via interest payments from their equity whilst having a claim on the property. This is overly burdensome, time consuming and costly to the homeowner.

Sellers normally do not undertake equity sales of their properties. If owners could release partial value of their property ownership as equity, trillions of value of UK property could be released onto the market. Savills analysis (Jan 2016) has indicated that “some 8.4 million owner occupiers with no mortgage outstanding on their property now own homes worth around £2.1 trillion (£2,097bn)” in the UK10.

This process has fundamental social and economic benefits for the UK. A major concern of local authorities today is the acute housing shortage in the busy London market. Lack of available housing at affordable rates in central London means those working in London are forced to commute from well outside the city. London is facing the same threats as other successful cities worldwide where only high-wage earners can afford to live in the city, while those essential to the support of the functioning of the city live further and further away11.

10 See: http://www.savills.co.uk/_news/article/72418/198296-0/1/2016/total-value-of-uk-homes-passes-%C2%A36-trillion-mark11 Silicon Valley is currently facing a similar challenge. See “Silicon Valley’s Housing Crisis: How did we get here, and what can we do about it?” – Silicon Valley Community Foundation and the Center for Continuing Study of California Economy (CCSCE), May 2017 (link)

One solution to this problem is building additional homes. However, this possibility is greatly limited by the lack of available plots for development, the restrictive planning policies in some areas and the costs involved. A potential solution is to develop the economic triggers to better use the surplus economic and financial capacity that already exists within the system to make efficient use the existing housing stock with economic incentives for both house owners and house builders to better use the existing stock by listing it on an liquid exchange to unlock the capital needed to then build new housing.

While the prime London property market has generated the highest returns, most UK investors are excluded from participating in this market due to the high acquisition threshold prices. As a result, those who are benefitting the most are already high net worth individuals. Increasingly, these are likely to be non-UK based investors. The proposed blockchain enabled property exchange that is the subject of this white paper offers all investors to participate in property investment without such a restrictive threshold – it is a transparent democratisation of the property investment process.

Limited opportunity for partial liquidity of properties for their owners

Housing shortage throughout London market

High price of acquisition of properties in prized London residential locations

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LISTING A PROPERTY ON THE BLOCKCHAIN

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Listing a Property on the BlockchainThe firm Universal TrustMe Engine Limited (‘TrustMe™’) and subsidiaries TrustMe Property Exchange (UK) Limited and the Blockchain Land Registry Limited (‘BLR’) were created in response to the need to bring greater liquidity to property assets. The founders recognised the need to open the London and other property markets to new forms of investment. Recent innovations in electronic recording of transactions in the form of a distributed (or shared) ledger technologies commonly known as ‘blockchain’ now make it possible to globally provide a transparent, audible and ‘trusted’ solutions to the current London property issues (and those of other countries). These solutions have in turn been defined and created to the levels of digital and regulatory trust needed for trusted third party digital transactions to occur that allow any properly ‘listed’ property assets to then trade freely as a new form of asset backed financial instrument.

Aside: Blockchain OverviewBlockchain is an electronic ledger with built-in security. Blockchain enables us to do electronically the steps previously taken on a manual basis in the manual ledger process. Blockchain transactions are open, sequential, visible to all and are transparent. A buyer can easily trace all transactions related to a particular asset on the blockchain.




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Blockchain Land Registry (‘BLR’)The Blockchain Land Registry Limited (‘BLR’) is a trust created to hold the equitable interest in properties on behalf of the interested parties (e.g., a seller or buyer of a property). It is worth noting a legal title holder of land may not be the only party with interest in the land or property. The equitable interest holder is another key stakeholder. In some cases, the equitable interest may have a stronger claim over the property than the legal title holder (e.g., when a contract to purchase has been entered into but not yet completed the buyer’s claim may prevail). The BLR will act on behalf of the interested parties to ensure secure transfer of property rights on execution of sale transactions as per the prevailing law.

In the TrustMe™ vision your home is now your own personal land/property bank where value can be created and stored for the owners of that property own direct benefit rather than for the benefit of the intermediary banks and financial institutions that had previously serviced them.

Blockification of PropertyOnce a property is properly provisioned and registered with the BLR, the property is “blockified”, essentially breaking it up into smaller equity pieces that can be readily traded. Due to these assets initially being residential properties, an initial minimum single block of 51% of the equity is established and is segregated for a named owner of the property who will take on liability, maintenance and insurance of the property. The other blocks representing 49% or parts thereof are then created and can in value size be as small as £250 per unit. Such smaller unit sizes that then represent direct beneficial ownership of the physical property (asset) itself open up investment in the property to a larger potential global investor base. As part of the registration process the Solicitor for the seller will be involved, creating certificates that evidence their share of the investment in the property (“property certificates”). ‘Blockification’ confirms that assets are controlled by owner and the blockchain, in conjunction with the government’s land registry and the BLR, confirms the precise ownership of any of the property assets at any and all times due to the sequential nature of the control of assets listed on the blockchain.


Initial Property ListingFor a property to be sold using the blockchain process on the TrustMe™ Property Exchange it must first go through a provisioning and listing process very similar to that used in an Initial Public Offering (“IPO”) for companies on a traditional equity exchange. The listing of a property on the TrustMe Property Exchange is therefore predictably called an Initial Property Listing (“IPL”) where the normal legal search, survey and insurance process that was previously completed by a buyer of a property on the acceptance of an offer in the sale process is instead completed before the property is listed as a part of the provisioning or listing process. Once the provisioning process is complete the property then ‘lists’ on the exchange via the BLR where this acts as the listing agent/registrar in the listing process. Owners of properties can now effectively list their own properties on an exchange and go directly to global property investors in a mirror of the existing property conveyancing process but now without the costs and time delays that might have previously applied to this process.

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PROPERTY ASSET TRADING VIA THE TPX

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Property Asset Trading via the ‘TPX’ The TrustMe™ solution in property is, as in the other industries that it works with, is to leverage blockchain technology by applying it to existing work flow processes – in this case the property market. Through this mechanism, we can list and trade properties in a mirror of existing workflow processes but with full auditable disclosure. TrustMe™ enables the sellers of a property to put their property certificates on the blockchain in a tradeable format without the costs and overreliance on third part intermediaries and suppliers. Registration and provisioning of the property certificates are done through the Blockchain Land Registry (“BLR”) and once a property has been listed on the BLR the owner can sell all or a portion of that property on the TrustMe Property Exchange (UK) Limited (‘TPX’) directly to interested homeowners and/or investors.

As previously highlighted, there is a need to maintain equity control over the property for its good management so the maximum equity amount of the property that can be sold is therefore set at 49%. The 51% owner remains responsible for the duty of maintenance and care of that property and maintains full use of such property (e.g., for primary residence, rental income, etc.).

Aside: Homeowners Purchasing TPX Listed Homes for 51% of Asking PriceIn the current environment of low interest rates, it should be noted that with properties where the value of property’s location and benefit of its asset appreciation (with the tradeable nature of the new asset backed financial instrument) is high then homeowners may well have opportunity on the TPX of only paying 51% of the asking price of a property listed on the exchange to be able to live in a property without the requirement for providing a mortgage or finance for the 49% balance of the asking price.

Property certificates in the property of up to 49% of its total equity value can be listed on the TPX. This process is referred to as the Initial Public Listing (‘IPL’). When the property certificates are listed, the seller would pay the BLR for the IPL process. The BLR would use a pre-set standard developed by known and approved solicitors and surveyors who would be paid directly to conduct the property listing process on the TPX in London.


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Aside: The DAV ProtocolThe listing process on the BLR would leverage a proprietary approach - the Distributed Archival Vector (‘DAV’) protocol (TrustMe™ patent pending) - to place the fungible property assets on the blockchain. This protocol builds on existing blockchain technology. The “blockified” listed property assets become electronic bearer assets assigned to the holder of the relevant electronic “keys”. As a digital bearer instrument registered on the blockchain, the ownership of the assets can pass from one investor to another with the secure transfer of the digital “keys”.

At the IPL event the original homeowner controls all of the property certificates for their property. Once listed, 49% of these property certificates (or a part thereof as selected by the listing owner) are made visible to approved potential investors who have passed AML (Anti-Money Laundering) and KYC (Know Your Client) procedures. The TPX, TrustMe™ trading application and approved brokers operating on the TPX, promote and market the property certificates to the potential investor base and the BLR then acts as the trusted 3rd party for settlements. The BLR receives payments for the property certificates from the brokers and/or approved investors and then it ensures that each certificate showing ownership of the property asset is correctly registered on the blockchain.

The BLR will continue to register all transactions related to the sale of property certificates in a listed property, making this information freely available to all stakeholders. Thus, these property certificates may readily change hands among investors per market demand, much as would be observed in other financial markets such as in commodities and/or specialised finance. Due to the open, transparent and sequential nature of all transactions tracked by the BLR, there would be no need for additional verifications of ownership of these property certificates. As a result, the traditional ownership verification process would not need to be undertaken for property certificates that have already been registered on the BLR. Costs are much the same in each case for the first sale or listing of a property as under the traditional, legacy and proposed BLR processes.

Note that for the partial sales of the property asset to take place, all transactions and the ownership of all of the property assets must all be recorded and maintained at all in times in the BLR, thus ensuring a full recording of the beneficial ownership of all listed assets at all times. In the event of a redemption event (akin to an announcement of a takeover on an equity exchange) then trading of a particular property asset can be halted. Equally for good governance, if trades break exchange rules, trading may be stopped and a particular asset could be invested and de-listed (if appropriate) from the TPX and the BLR at its last listed value.

It should be well noted that the listing of a property asset on the BLR could turn it into a more liquid asset than would be possible under the traditional, legacy scenario for this asset class. This is due to the fungible nature of the blockchain enabled property asset, the lower costs of trading that asset and the accessibility of investment in the asset by a broader potential investor group. Ultimately trading these BLR-registered property assets would be similar to the trading of gold-backed or asset backed certificates.

Seller ‘Lists’ Property with particulars on the TPX via

Existing Sales Channels and the Blockchain Land Registry

Survey and Search particulars completed before listing via approved suppliers

Estate Agents and/or

Solicitors

BLRBlockchain Land Registry

(A non-profit trust acting as the blockchain registry of

all properties, trades and smart contracts)

Existing Land Registry or Deed Office(Records the ≥51% holder and then BLR as the legal representative for any others)

TPXTrustMe™ Global

Property Exchanges (Properties shown in local fiat and Bitcoins

but all trades are completed in Bitcoins)

Banks/Brokers(for settlement

in local Fiat or Bitcoin)

Seller

Aims to sell all or up to

49% of their property

TrustMe™ Property Exchanges - Operations

BuyerWishes to either invest in the tradeable, asset backed,

financial instruments or to buy/part buy a home, development, or rental property

Buyers Sellers Banks/Brokers Surveyors Insurers Solicitors


Confidential. © Copyright Universal TrustMe Engine Limited 2017Confidential. © Copyright Universal TrustMe Engine Limited 2017

Trading of the Property certificatesBefore trading in property asset property certificates, investors need to be assured of the assets’ integrity, and therefore the reliability and the ongoing risk profile of the property that underpins it. In order for the asset to be traded in real time, investors need to be comfortable the asset is in a known condition and the following items are in place: trusted physical confirmation of the status and condition of the property, title insurance, ownership, hazard insurance, surveyor insurance. Questions asked will include -- Has the property been degraded? Have the relevant property taxes been paid? All information must be kept up to date to an agreed standard and insured for all other risk.

Housing occupation and trading aspects of a listed property are different. The 51% owner has pre-emptive rights and so their larger controlling interest can govern the position and will enable the other 49% owners to sell if they need to get full liquidity for their investment. Like any property owner, they may be willing to sell their holding and thus the entire property at a premium vs. the trading market price of the 49%. However, an owner in a rush to liquidate their full holding may sell their own 51% stake below the prevailing trading price of the fungible property asset on the TPX (just as flooding a market of a particular share may lead to a drop in share price).

The 49% owners trade via the TPX. This trusted 3rd party makes its revenues from listing fees and from the transactions fees from the buyers and sellers of the property certificates as well as broker subscription fees. Control of the property certificates are passed to the TPX where they are listed. Share transfer is done with Blockchain asset registration and signature control.

The BLR provides a registrar mechanism that allows the properties to trade freely. Future investors can see full listings of properties and, where appropriate, their owners on the BLR. There is fungification of property on the blockchain – one unit is indistinguishable from another, property certificates in one property are all equivalent. These would become traceable short-term secured equities.

Comparing property certificates of one property to another property will be based on market rates for the property itself with potential upside for an individual property’s tradability. The fact that marginal components of a property can be traded increases liquidity for that property, thus increasing the potential value of a portion of that property over and above typical market rate for the entire property.

New Asset Backed Financial Instruments and EnginesThe bearer of property certificates created by the IPL enable the creation of a totally new class of tradeable financial instruments which are secured by blockchain registered (property) assets. This enables the creation of financial instruments whose terms of purchase or selling can be automatically fulfilled without human intervention. Trusted third party software engines can be used to implement and trade these new financial products using such software coded automatic ‘smart contracts’. Here are some examples of new debt based instruments that are possible:

z Company debentures secured against the property listed on the BLR – the property is automatically transferred to the buyer of debentures in a default event from the seller. Loans can be placed directly by companies on an exchange with vastly reduced counter party risk and without intermediaries.

z Company or personal bonds with fixed yields and maturity dates automatically managed by trusted Blockchain Bond Engines (‘BBEs’) – yield and maturity payments are automatically monitored through the Blockchain for compliance; defaults can result in BLR property assets being automatically transferred to the buyer.

z Promissory notes issued with BLR property assets as collateral – terms of the promissory can monitored for compliance by Blockchain Promissory Engine (‘BPE’); default results in BLR property assets being transferred.

z In each financial product above, enforcement is done via Blockchain Engines. This approach drastically reduces the cost and risks in issuing one of these instruments, and more importantly increases the potential investor base for these products to a worldwide audience.

Asset Integrity ManagementAn important element to ensure the attractiveness of any property asset is confirmation that the integrity of the asset is protected. The majority 51% (or more) owner benefits from controlling their asset, including living in the property. The owner occupier will naturally be focused on ensuring comfortable living conditions but also has a duty of care in relation to the property, including signing up for insurance (e.g., hazard insurance, title insurance) on the full value of the property and paying the relevant taxes, etc. (as is often the case under existing mortgage products). Meanwhile the remaining investors (with 49% or less ownership) in the property, as simple equity owners, will be most interested in ensuring the above steps have been taken to ensure future sale-ability and trade-ability of the property and its property certificates.


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BENEFITS TO THE PROPERTY MARKET

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Benefits to the Property MarketThe BLR and TPX solutions offer a range of potential benefits to the UK property market. These include:

Seller Benefits

Lowering time delay to obtain liquidity properties once listed on the BLR may be sold off whole or in part as an asset backed investment in a timing that is most beneficial to the existing owners without the additional time delays that typically are associated with home sales

Potential higher returns for all shareholders Increased liquidity of the tradeable, asset backed, property certificates could potentially bring higher market value to all the owners of the property than may be achieved if the property was sold one block

Providing homeowners with a new form of equity release

By providing property owners with the means to sell a portion of their property (up to 49%)

to interested global investors via the listing process, the BLR enables owners to benefit

from their investment without having to resort to increasing their debt obligations or

lose control over their homes

Increased value to the home ownerA property that has been “Blockified” may be a more valuable asset than one that has not as it may have a more financially liquid profile, as the blockchain enabled

listing process increases the property’s future liquidity and value. The majority owner may therefore get more value out of their property as they are portion

of the asset that they do not hold trade on the property exchanges. If this is the case then they may be able to command a more than standard market value for the listed ‘blockified’ property in a similar way that properties sold with planning

permission may attract premium sale values



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Investor/Buyer Benefits

Financial and Political BenefitsSolving housing shortage – housing crisis in London is in part resolved by opening up properties to new 51% owner occupants

Management of Money Supply – with Blockchain technology, assets ownership can be tracked and thus money is not created where it does not already exisit (as for example would be the case with the creation of a mortgage). In this environment, credit cannot be created without collateral to back it up. Ultimately this benefits the financial markets as these assets cannot be unduly inflated.

Opening up the property market to new home ownersThe TrustMe™ approach opens up the possibility for some home owners who do not have sufficient funds to purchase an entire property in their ideal residential location to purchase 51% of the listed property certificates of their desired house. The remaining 49% may be purchased by interested global investors who may wish to invest solely in the asset class for capital gains or for security without further payment of interest by the 51% holder or a requirement to provide a mortgage for the balance of purchase price of the property.

Lowering the entry point for investment Traditional prime London properties may be harder to sell due to the high market value but low supply of purchasers that they command. The ability to blockify these premium property assets enables smaller chunks of these properties to be sold to any one investor, thus significantly decreasing the entry price point for a potential homeowner and increasing the potential investor base that can invest in the property which in turn enables greater liquidity and velocity in sales of these often slow moving assets.

Investing in the asset class without downstream obligations or costs The ability to trade freely 49% of the equity in individual properties across the London market provides greater liquidity to potential investors who do not wish to have the obligations, costs or risks of managing properties. It also makes it easier for investors who are not UK based to actively invest in the UK market without having to be physically present.

Benefits to the Property Market

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CONCLUSIONS AND NEXT STEPS

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Conclusions and Next StepsAs we have discussed in this whitepaper, blockchain technology was initially applied to the creation and conveyance of private currency. At the time of writing, Bitcoin’s market capitalisation is almost 50 Billion US dollars, and is projected to double in the near-term. The success of Bitcoin has been predicated on the successful use of blockchain technologies over the past 8 years. Bitcoin has proven itself a secure means to transfer wealth in the form of electronically transferable digital currency. It is no stretch of the imagination that blockchain technologies should now be used as the means to transfer the ultimate form of wealth in western societies - property.

The legacy workflow processes and stakeholders that have evolved over the past two hundred years for the conveyance of property, and its use as collateral (e.g., land registries, solicitors, title insurance, surveyors and land acts) have been put in place to insure the clear, transparent and lawful transfer of English property amongst its subjects. This process however has not evolved to match the liquidity of other forms of equity such as stocks or debt instruments such as bonds.

Our goal at Universal TrustMe™ Engine Limited is to use the legacy workflow processes to pass control of property to the blockchain. We believe this is clearly the next evolutionary step in conveyance of English property, and along with it the aforementioned benefits to all parties and to society as a whole.



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APPENDIX

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Appendix

Select Additional Sources z HM Land Registry https://www.gov.uk/government/organisations/land-registry

z UK House Price Index (HPI) http://landregistry.data.gov.uk/app/ukhpi

z “House price statistics for small areas in England and Wales: year ending Dec 1995 to year ending Dec 2016” – Office for National Statistics Statistical Bulletin

z https://www.ons.gov.uk/peoplepopulationandcommunity/housing/bulletins/housepricestatisticsforsmallareas/yearendingdec1995toyearendingdec2016

z “Ratio of house price to residence-based earnings (lower quartile and median)” – Office for National Statistics https://www.ons.gov.uk/peoplepopulationandcommunity/housing/datasets/ratioofhousepricetoresidencebasedearningslowerquartileandmedian

z Savills UK Property Research http://www.savills.co.uk/research/uk.aspx

} “UK homes worth a record £6.8 trillion as private housing wealth exceeds £5 trillion”, 18 January 2017 http://www.savills.co.uk/_news/article/72418/213407-0/1/2017/uk-homes-worth-a-record-%C2%A36.8-trillion-as-private-housing-wealth-exceeds-%C2%A35-trillion

} London prime market housing growth rates by area http://research.euro.savills.co.uk/_images/f1(78).png

} “The market’s change of gear”, 3 November 2016 http://www.savills.co.uk/research_articles/141285/209213-0

z “Over £8 trillion - the total value of UK residential property in 2016” – 20 December 2016, International Business Times http://www.ibtimes.co.uk/over-8-trillion-total-value-uk-residential-property-2016-1597268

z “The state of the UK housing market in five charts” 2 September 2016, The Telegraph http://www.telegraph.co.uk/property/house-prices/the-state-of-the-uk-housing-market-in-five-charts/


About Universal TrustMe Engine Ltd.Universal TrustMe Engine Ltd was founded in 2016 in London, UK by Industry professionals who had a vision to completely redefine how the world does transactions in the areas of finance, shipping, pharmaceuticals and property. This lead to the creation of a software development company specialising in the design of public and private blockchain software engines.

Our software development teams focus on industry verticals, carefully determining the best means of using blockchain technology to reduce legacy workflow processes times and costs and expanding the new processes to take advantage of all the benefits of this new technology.

For more information, contact:

TrustMe™ - Universal TrustMe Engine Limited 33 St. James’s Square London SW1Y 4JS United Kingdom Telephone : +44 (0)20 7129 1348 E-mail : [email protected] Web : www.U-TrustMe.com

Twitter : @TrustMeBlockChn

About the Blockchain Land RegistryThe Blockchain Land Registry (“BLR”) is a trust created to hold the equitable interest in properties on behalf of the interested parties (e.g., a seller or buyer of a property) who wish to trade property assets on the Blockchain.

About the TrustMe Property Exchange The TrustMe Property Exchange (UK) Limited (“TPX”) is a wholly owned subsidiary of Universal TrustMe Engine Limited and is designed to facilitate and enable the trading of property assets that have been registered on the BLR and ‘blockified’ for trading purposes.


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