Blockchain-Native Investing for a Resilient Thriving Future

As a real estate developer/investor, key benefits of tokenization include:

• Reducing illiquidity discount in real estate deals
• Increasing liquidity by fractionalizing ownership interests
• Facilitating secondary market trading and price discovery
• Lowering the barrier to entry for smaller investors, expanding your capital pool
• Simplifying and automating administrative tasks like distributions
• Enhancing transparency into fundraising and asset performance via the blockchain
• Accessing retail, international and crypto investors
• Streamlining and accelerating the capital raising process
• Unlocking the value of existing assets that are cash flowing or complete
• Maintaining control over day-to-day operations and management
• Improving visibility and reporting to attract investors

Tokenization involves representing some type of real estate interest as a set of digital tokens whose rights are stored on a blockchain. These tokens act as programmable shares - they mirror the underlying economics, cash flows, voting rights, etc. of a real asset. We use ERC-1404 compliant tokens using smart contracts to encode a client's investment terms and automate distributions.

Tokenization introduces new avenues to overcome illiquidity discounts and enable issuers to leverage a liquidity premium in their deals Tokenization in real estate enables a secondary market where tokenized interests in a project may be traded more efficiently. Automated smart contracts enable customizable liquidity options like redemption rights for issuers and investors for different deal phases.

Tokenization offers several benefits compared to traditional financing methods. Tokenized real estate democratizes access to real estate investments by allowing smaller retail investors to participate with smaller minimums.

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Tokenization fundamentally improves the efficiency of real estate transactions by providing new liquidity options and eliminating illiquidity discounts baked into deals. This means issuers get better returns on their investments through more efficient operation. The process of tokenization additionally streamlines admin through smart contracts and blockchain-based record keeping. Costs will vary based on factors like asset value.

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With each subsequent recurring tokenization, the costs decrease. There are also third party costs like legal, escrow, brokerage fees. While not always cheaper than traditional financing, the goal is to access new capital sources and add liquidity.

The valuation process is the same for traditional finance as it is for tokenization. As such, the valuation process is overseen by accredited, independent third-party appraisers to ensure fair market valuations that align with regulatory requirements.

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Likewise, legal ownership of the underlying real estate asset remains with the asset holder/issuer post-tokenization. Token holders only have an ownership stake or enforceable economic interest in the performance of the asset. Token holders do not have governance rights in the decision making of the company or title to the physical property itself. Additionally, the specifics around legal ownership depend on the structure and regulations in play. For instance, with a Reg D offering the issuer retains full control and ownership.

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With a Reg A+ offering, a neutral third party might hold the deed. We work closely with clients to structure issuances in a compliant manner that meets their needs.