DREAM enters real estate security token business, tapping retail investors
Diamond Realty Management (DREAM), which manages real estate funds within the Mitsubishi Corporation Group, launched the operation of its first real estate security token (ST) product “DREAM Realty Token — Residence 1-” in January.
Real estate STs are digital securities backed by real estate or related assets, with rights transfer and recording done using blockchain technology. In recent years, more and more businesses have been working on them as they allow raising funds widely and at low cost from individual investors.
“We have been preparing to enter this field for the past 2–3 years. Our company has mainly operated businesses for institutional investors, but with tailwinds from the government’s policy of making Japan an investment management nation, we want to provide quality real estate investment opportunities to individual investors as well,” says Tsunenori Ishiwata, President and Representative Director.
For DREAM, attracting individual investors’ money offers the benefit of stable fundraising through customer diversification. While institutional investors make large one-off investments, their movements are swayed by macroeconomic conditions and interest rate trends. With the Bank of Japan’s monetary policy review expected, a cautious stance toward investment is gradually emerging. Anticipating this, DREAM aims to capture individual investment demand. The market size for individual deposits and savings exceeds 1,000 trillion yen, so even just 1% of that moving into real estate would have a huge impact.
The total issuance amount for the DREAM Realty Token — Residence 1- is 35 billion yen (1 unit = 10 million yen, 3,500 units). Offered through Daiwa Securities, all investment units were sold out in 13 days. The real estate ST issuance and management platform used was Progmat by Progmat Corporation, invested in by Mitsubishi UFJ Trust and Banking Corporation, among others.
The underlying assets are three student residences: “S-RESIDENCE College Gate Nagase” (Higashiosaka City, Osaka Prefecture), “Campus Forest Shimura 3-chome” (Itabashi-ku, Tokyo), and “Livio Season Kameari” (Katsushika-ku, Tokyo), with a total appraised value of 76.7 billion yen.
“All of them have fixed-rent master lease agreements with major operators, ensuring high revenue stability,” says Noriyasu Kobayashi, Executive Officer and Head of the Fund Business Division.
The target operation period is 7 years (maximum 10 years), with an expected dividend yield of 3.8% (forecast for January 2025, annualized).
DREAM plans to successively increase its real estate ST product lineup going forward. Leveraging its expertise in providing diverse products to institutional investors, it intends to offer a wide range of products, including stable income-generating assets like rental apartments, logistics facilities, and data centers, as well as assets with upside potential like hotels. In the future, it also considers developing products backed by U.S. real estate or mezzanine loan claims.
“Unlike REITs, we can securitize individual properties into funds. Taking advantage of this, we will supply unique investment products. As these target individual investors, we are also exploring ideas for extras similar to shareholder benefits beyond just dividends,” says Ishiwata.
While trading houses like Mitsui & Co. Digital Asset Management and Marubeni Asset Management, as well as real estate companies like Kenedix and Ichigo, are pioneers in the real estate ST field, DREAM’s entry with its leading domestic track record as a real estate asset manager is expected to further expand the market.
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