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From left: Josh Stein, Stephane De Baets (Credit: Harbor, Elevated Returns)
The long-awaited real estate business with blockchain technology seems to come true.
Just as investors in real estate investment funds can buy shares that represent a share of ownership in one piece of large trophies, a digital security token offering works the same way. The difference for tokens is that generalized accounting technology is used to record the transaction and all subsequent transactions on a blockchain.
Blockchain is a distributed public accounting system, which means that, unlike centralized registries often managed by a single entity, multiple copies exist and each participant in the system maintains a copy of a blockchain that it is updated when new transactions occur.
Using blockchain technology, low-cost peer-to-peer transactions can be carried out between anyone, anywhere in the world, bypassing established banking systems. Although blockchain exchanges are better known as cryptocurrency trading centers, which probably brought the technology into mainstream after the bull run last December, a pioneer of real estate owners and investors are now sinking.
How blockchains and tokenised bonds could be used by real estate players to exploit new sources of capital acquired after the Chimera group Shahal Khan proposed to use an initial offer of coins to buy the Hotel Plaza at the # 39. beginning of this year. And, more recently, the Amirian Group has launched the first New York-based stock market powered by blockchain for a luxury condominium in the East Village. (David Amirian declined to comment on the status of fundraising).
But now a handful of players are creating new platforms to launch new businesses. Here are two recent examples of new companies trying to take advantage of the blockchain to stop financing and real estate ownership with a surprising vehicle.
Base camp
In Aspen, Colorado, 179-bedroom luxury property, St. Regis Aspen, has recently raised $ 18 million through a security token offering where Aspen Coin tokens represent single-asset REITs who owns the hotel.
"Effectively purchase an electronic and digital share in the REIT," said Stephane De Baets, CEO of Aspen REIT, the owner of the St. Regis Aspen.
(Later, De Baets stated that the company intended to present taxes as REITs, but "may or may not be a REIT at the time", due to the requirement for REITs to have at least 100 investors. tax.)
The minimum buy-in for the Aspen coins was $ 10,000, although De Baets said that many investors "actually wrote a check much larger than that".
The token of the hotel was only open to accredited investors, although it was marketed by the crowdfunding platform, Indiegogo.
He said the 18 million dollar offer "was not about raising funds, but about demonstrating concept".
Elevated Returns, the parent company of Aspen REIT, also run by De Baets, is working on a similar security token offering in Bangkok with the city's "number one developer" and using three condominiums as assets below. He said that the company's goal is to become "the leading global real estate tokenisation platform".
"We took the first step of a much bigger business plan," said De Baets.
The omniscient commercial oracle
Another example is the company from Harbor, based in San Francisco, which claims to have raised $ 40 million from investors Andreessen Horowitz and Fifth Wall. The start is proposed as a specialist for the management of real resources, such as property. By using security tokens to represent actions, Harbor believes it can unlock unprecedented liquidity in assets known to be difficult to negotiate quickly and real estate is their main objective.
"The role of Harbor is to bring these tokenised assets to market" to allow "a larger pool of investors to participate," said CEO Josh Stein. He noted that "people come to us [are in] real estate. "He estimated that about 75 percent of the businesses in the Harbor gas pipeline are owned.
At the end of November, the famous Chicago derivatives trader, Don Wilson, launched a security token through one of his real estate companies, Convexity Properties, where a token represents a single stock in the single-asset REIT that owns a dormitory $ 95 million student.
According to Stein, Wilson wanted to distribute about half of Convexity's share capital in the building – for a total of $ 20 million – by selling chips for $ 21,000 to accredited investors. (Unaccredited investors can buy tokens after the first year.)
The role of Harbor – the first to be the starting point – in Wilson's commitment is to ensure compliance of the token with US securities regulations.
Stein described the company as an "omniscient commercial oracle," which can monitor transactions using the code embedded in the digital currency and block "unapproved" trades. For example, if the "real world" identity of one of the parties can not be ascertained, or a sale violates the rules of ownership of a REIT, Harbor will block the transaction.
Stein hopes that Harbor will become a technology company that provides services to real estate investment banks.
"It's a transfer from the world of ordinary mail to the world of email," he said.
Reality control
The New York lawyer, Roger Lorence, described the "many, many regulatory issues" around the concept of discouraging properties as "discouraging", unless a "very satisfactory budget" was available, particularly when a private REIT structure is used.
If a REIT exceeds the maximum number of investors – "You want to stay below 500," said Lorence – must become public, which could land a business "in a heap of trouble" if it breaches that threshold inadvertently.
Furthermore, REITs require a detailed identification of shareholders to maintain the status. Revealing investor identities could prove to be a critical obstacle, according to Lorence.
"In the universe of cryptocurrency, investors are rather shy about the IRS," he explained. "[But] if they have a currency, they must give up their ID numbers to the REIT and the REIT must hand it over to the IRS – if they are interested. "
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