Any interest in a real SL bank?

As well as the post by Something Something above, I would comment that the Linden Dollar, while held, has what they call fungible value.

Therefore it is human nature to want to set that money to work. Some of us do not have the time to spend hours and hours creating things to sell to other avatars, or taking on board the complex issues of land management (rental) which if successful can generate an accrual income.

Other people certainly have the time, but perhaps not the money or risk capital to generate and set up a Sim/Island rental business. You need at least 10 Sims to both spread risk of default by rental tenants, and generate a sufficient surplus over tier to make it a real life worthwhile second income. After all the current cost structure would mean a capital investment in the order of $16,500 US dollars and revenue expenditure of between $2,000 to $3,000 per month to achieve this base.

Hence the possible need of prime Second Life finance via secured lending on land and primary and/or mezzanine finance to meet that need. Together of course with investment opportunities for more passive investors.

Regards

John

You're essentially correct, SS. But I was referring to these fictional investors as bondholders because this idea involves a debt issuance. They don't own a share of the sims, the own part of a loan.

Let's say you want to start a business called Something Estates. You ideally want 10 private island sims where you can sell the land and make a small profit margin off tier each month. But you don't have the $16,750 that this requires. So you issue debt (in the form of bonds), $16,750 worth. In essence, your potential investors will be loaning you this money. Come up with an interest rate that you will pay on this debt, say 10% for example (I'm too lazy to calculate a more accurate estimate) and decide on a maturity date (when you will pay back all the principal), say 1 year for example. You sell these bonds to investors at a price of 100 (this is called "par" and facilitates the subsequent trading of these bonds). There is only a fixed amount of these Something Estate bonds. The bondholders can hold the bonds until maturity, or sell them to other potential investors (at par or at a different price depending on how well or poorly your estate appears to be doing).

I hope this isn't too confusing, but I'm really busy at work today and didn't have much time to proofread...

I do have a general notion of how bonds work in RL, it's just that your original posting said "there would be bondholders that would effectively own a share of the sims". I think this was poorly worded.

I'm not sure if "bond" is the best term to use, since this tends to imply large issues with a large number of bondholders and active trading on a bond market, none of which exists in SL. Perhaps "note" would be a better name. However, it's not even clear that these would be negotiable instruments, so maybe it could simply be called an "IOU".

My thinking was that these "bonds" could be traded despite a clear lack of liquidity in this fledgling "market" (thanks for pointing that out Elan)... In real life, the most senior debt holders would get any liquidation proceeds from a bankruptcy, which would also be the idea here. There is no bond market in SL yet, for obvious reasons, but hey, it could happen. Bond/syndicated loan/IOU, doesn't matter what you call it... Just an alternative to the Ginko black box business model...

Except there is no bankruptcy in SL, and LL will probably not carry out or enforce any liquidation of assets, or in general enforce any in-world contracts whatsoever. To the extent that the term "bond" implies secured debt, and senior creditors ending up holding equity in a restructured entity after bankruptcy proceedings, it's misleading because none of this exists in SL, none of it will happen.

I'd be tempted to offer some unsecured IOUs (say, an issue of L$ 1,000,000 at 9% annual interest paid monthly, minimum investment L$ 20,000), just as an experiment to see if eager investors will come out of the woodwork like Desmond, Elanthius and John suggest they will. Any takers? But you'd have only my word that I'd ever pay it back... to pretend otherwise would be misleading. And like Desmond I don't particularly care to reveal RL info. The only thing that would distinguish me from a cheapskate version of Ginko is that I'd deign to reveal the source of revenue: mortgages for private islands.

Still, I strongly suspect that people will either go for the wacky Ginko interest rates or prudently restrict their investing to RL, and there won't be much middle ground. So I'm financing the mortgage loans myself and crossing my fingers that LL will raise my billing tier purchase limit from 10k to 20k if and when it should be necessary.

Right, right. There would clearly need to be a regulatory framework in place for anything like this to be possible. Not going to hold my breath Sell me your land in Da Boom, SS!

Not likely. Owning land in historical Da Boom helps jumped-up late-2006 parvenus like you and me pass ourselves off as SL veterans.

But if you have L$ 999,999,999 burning a hole in your pocket, I might be persuaded to part with it. It's a bargain... you'd get more than 200 times more land than the 16 sq.m. such a sum will usually buy.

I remember we talked about a piece of land that sold there for some exhorbitant amount. Was it 80L/sqm? I forget...