Real Estate Tokenization

[Vontarius Dameko]

What is the general consensus around real estate tokenization? I've been talking with the executives of some companies that are crushing it in the space currently & opening up real estate investing to the masses through tokenization. Yes they avoid the issue of offering tokenized securities. Yes, these are SFH, MF, & Commercial Properties! What has your experience been like in regarding this?

[Kyle Stevie]

Quote from @Chris Seveney:

Quote from @Vontarius Dameko:

What is the general consensus around real estate tokenization? I've been talking with the executives of some companies that are crushing it in the space currently & opening up real estate investing to the masses through tokenization. Yes they avoid the issue of offering tokenized securities. Yes, these are SFH, MF, & Commercial Properties! What has your experience been like in regarding this?

 How can they offer a token without offering tokenize securities would be my first question?

Second is what is the difference between tokenization of a multifamily property and a normal syndication that has 200 investors? 

For tokenization, we see it a lot also called fractional offerings. I looked at them and honestly I did not see where there was enough meat on the bone. For example a company goes out and buys a property for $200k. They charge an acquisition, disposition and management fees. We have 100 investors who bought in for $2k each. I do not see an avenue to make money and greater chance to lose with it being that small.  Larger scale maybe but its really just a syndication. What is the difference?

Lastly is the term tokenization. If people do not understand it they will not do it. There are many I know who will not touch crypto currency (using this as an example only) as its something that is not easy to understand. Hot wallet, cold wallet etc... The more complex something is, the less likely to get the masses. For example I would guess that anyone over 60-65 years old trying to explain tokenization to them would be like "huh?"

Just my 2 cents. Plenty are doing it, not sure if they are profitable yet or what it will look like but time will tell.

This is where the first battle of mass adaptation will begin.  The tokenization of real world assets as used by people like Larry Fink and others is taking a digital representation of a SECURITY interest in an asset that currently exists, or will exist, and making those interests available for trade.  All logic tells us that either the SEC or CFTC will govern those trades and ALL will have to be compliant with the regulations of either agency.  This is what most people talk about when discussing tokenization.  Using smart contracts to lower settlement and other operative costs.  Using blockchain to maintain a compliant investor stack and using layer 2s to connect settlement brokers with transfer agents.  This is what is going to happen to unlock trillions in illiquid capital b/c the value of each security will be dictated by the performance of the asset.  You don't need a special understanding of securities to understand this.

What you are discussing is crypto.  There is no risk for the owner of the SPV that holds title to the property, b/c their "investors" have no ownership interest.  They receive tokens that represent what their percentage of the project is, but their equity is 100% dependent on the crypto market.  So, if you are in a property early, wait 6 months or whatever the hold period of the offering type is, and then unleash your tokens onto an exchange, you potentially influence the value of that token forever, no matter how the underlying asset performs.  

@Chris Seveney there is no difference in regards to syndication, private reit...wherever you are fractionalizing ownership.  It is an added tool to offer investors so that they can potentially realize liquidity before a GP is ready to sell or refi the property.  Josh Kagan at Bonfire is a great reference point for this.  He's currently tokenizing his LPs' interests for the future.  While you are correct that there is very little value add to tokenizing NOW, within the next five years (as long as Gensler gets dumped quickly from the SEC) all classes of assets will be tokenized.  Wealth building will become accessible to the masses and not just accredited investor.