A New Attempt to Tokenize Real Estate Projects in Mexico and Canada — NASDAQ.com
MountX Real Estate Capital has licensed transfer agent Vertalo to design and launch tokens for at least 15 digital real estate projects in Mexico and Canada through 2020 and early 2021, the firms announced last week.
According to a press statement, this is the third of four planned deals by Vertalo’s real estate division (VRE), launched this past June, that focuses on the tokenization of real estate assets. Vertalo is one of the few transfer agents with Securities and Exchange Commission-registered record keepers in the crypto industry.
Real estate tokenization once looked like an extremely popular blockchain use case that promised to disrupt the global real estate market, with crypto firms like AlphaPoint and Harbor launching initiatives to put real estate assets on a blockchain. However, investors didn’t immediately take to the new promise of trading tokenized pieces of properties on a public ledger.
One problem was that issuers had to get tokens out to increase liquidity, while institutions wanted to see liquidity before they changed their operations. Multiple deals have fallen apart as a result, including Harbor’s partnership with the real estate division of Chicago-based DRW Holdings.
Vertalo co-founder and CEO Dave Hendricks told CoinDesk the 2018 “hype cycle” for real estate tokenization was about two years ahead of the implementation of the technologies needed to make it a reality.
According to Hendricks, although tokenization of real estate had been possible for three years, the alternative trading systems (ATS) and exchanges that could trade these digital debt instruments had not received regulatory approval.
“Another missing piece was the digital transfer agent — like Vertalo — that could manage the shareholder data for proper record keeping purposes,” Hendricks said.
Now, 2020 has seen a rekindled interest in the sector. In February, commercial real estate platform Red Swan partnered with token platform Polymath to tokenize $2.2 billion in real estate assets. In April, Vertalo signed a deal with trading platform tZERO to tokenize a real estate portfolio worth $300 million.
VRE’s new partnership with MountX will facilitate direct investments in Class-A residential properties located in Canada. MountX will be conducting multiple issuances: initial deals will only be promoted to Latin American investors, and eventually expand to include U.S. and Canadian markets. According to the statement, through the digital tokens, investors will be able to directly access their equity and asset information.
“The international aspect of this deal highlights the limitless potential of issuing digital equity of real estate assets,” the statement said.
Traditionally, many real estate offerings are marketed quietly to insiders, but MountX’s work with Vertalo broadens access and improves the chances that a retail investor can invest in or offer their properties on the MountX platform, Alec Beckman, director of business development at Vertalo told CoinDesk.
“Real estate is something that not many people have been able to invest in before. You have to know or get connected with a real estate general partner, or understand how to build a portfolio yourself,” Beckman said.
Currently 99% of private real estate capital is raised under the Reg D exemption, which means it is only available to accredited investors, Beckman said, adding that digital assets will give accredited investors a chance to participate in real estate investment opportunities.
Beckman also said Vertalo is working on a digitization project that would allow overseas and non-accredited investors the opportunity to invest in real estate assets.