Real Estate In Blockchain: Tokenization Blog Pt. 1 | Advantage Blockchain & Vertalo Real Estate

My name is Alec Beckman, and I’m a Blockchain business integration consultant with Advantage Blockchain & Vertalo Real Estate. My team and I are very excited to announce that we will be working on a major blockchain real estate project. The goal we are working towards has been accomplished so few times you can count the successes on one hand: We are tokenizing a major commercial real estate building.

What does Tokenizing a building mean?

Tokenizing an asset means using a blockchain to create tokens that represent ownership of an asset, in this case, an office building. This ownership comes with a set of rules (or governance), set by the general operator (or issuer) of the asset, to determine exactly what token ownership signifies. These tokens can be directly owned and instantly traded on secondary markets without interference from the general partner. These new concepts of direct ownership, direct listing ability, and global tradability are creating increased liquidity opportunities that typically aren’t available to limited partners investing in Real Estate. Tokenization can be done with a primary raise to issue new ownership equity, or by issuing equity-backed tokens that represent current ownership in an asset.

How will we accomplish Tokenization?

To successfully tokenize a building, a lot of thought and planning is required. Tokenization being a new process combined with an asset class where each deal is very unique means there are no direct guidelines or standard for accomplishing. There are tokenization platforms, specializing in different services, with different prices. Some platforms focus in Cap Table Management, while some are better at helping to complete a primary capital raise. Some deal with compliance or custody themselves, and some outsource compliance and custody.

Our job is to clearly develop and implement a strategy for our client based off their end goal. We want our clients to go with platforms they’re comfortable with, that clearly fit what they’re trying to do, and deploy a reasonable pricing model. Once we have identified what our client’s goals and priorities are, we can give a platform-specific strategy and begin to execute it. Once we’ve selected appropriate platforms and third-party entities, we manage the entire end-to-end process of tokenization, representing the client.

What are the benefits of Tokenizing a building?

Benefits of tokenizing a building include:

• Increased Liquidity
• Larger Investor Pool
• Liquidity Premium
• Quicker Transactions
• Accurate Information through Immutability
• Autonomous system through Programmability
• Clearly Defined Asset Governance/Management

I will be doing a deeper dive into each of these benefits and what they mean as we go forward. I am excited to confirm the potential benefits, and how they are created from the first hand insight that I get from working on this project.

What issues are we expected to face?

• Regulatory
• Costs
• New process
• Third Parties

Like the benefits, I will wait to deep dive into the issues facing tokenization until I see what issues we have to deal with first-hand. This process will be a lot of problem solving, and I’m sure that more problems will come up than what I could even think of.

News

• Gulf Families, a London Real Estate ownership group, will tokenize the Landmark London Hotel, as the first property of its $1 Billion portfolio that will be tokenized.
• Spencer Dinwiddie, a Point Guard in the NBA for the New Jersey Nets, is tokenizing his contract worth $34 Million over three years. The tokenization would give him a lump sum up front, worth less than the total $34 Million that it’s valued at. He will then offer his guaranteed money as returns for the token holders, as fixed income.

Advantage Blockchain will be bringing you first hand insight throughout this whole tokenization process, which will include blogs, interviews, videos, and a case study. Follow along and reach out to alecbeckman@advantageblockchain.com to learn more or ask questions.

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