Amiran Group, a real estate firm in Manhattan, alongside the property developer and partners are turning to tokenization as a way of selling real estate property. It will be the first time blockchain and cryptocurrencies are used for investing in the Manhattan real estate market according to the partners. Tokenizing is a method where the value of the real estate property is represented/valued in digital assets on a blockchain resulting in "smaller fractions" digital assets that can be bought separately by different investors. The owner offers the property for sale as tokens and raises the total amount of property value from different investors instead of having one buyer buy the property.
When it comes to selling real estate property, it can take time for one or just a few partners to raise the money in order to buy high-end property. Thus, for sellers, it can take time to sell the property. For buyers, not everyone would be in a position to raise a huge amount of money to buy high-end property and that means many would not participate in these kinds of property investment. Tokenization thus unlocks potential for both worlds. Tokenization not only sees many people investing in a real estate project but that the tokens can also be held and increase in value as the property appreciates, and even sold on exchanges.
The group is starting with tokenizing a condo project in the East Village, which is a 12-unit construction with 1700 sq ft units. The property, which is to be tokenized on Ethereum blockchain, has been appraised for more than $30 million and the project has already received financing of $16.95 million according to records at the New York City Department of Finance. The project will use crypto as an alternative although people can still use fiat to invest in the project. Investors in this project can receive analog or digital interests in the securities.
Amiran Group will work with Fluidity, a blockchain company that created a decentralized token trading platform called AirSwap while Fluidity will work with Propellr Securities LLC, a New York-based company that will be the broker-dealer of the LLC. Propellr Securities LLC will do the job of finding buyers of security through their tech platform or rather take the interests and turn them into tokens. The partnership with Fluidity will allow the latter to accept fiat payments and solicit and sell securities under Reg D rule 506(c). Fluidity provides technology services to registered broker-dealers, issuers and financial institutions for tokenized securities.
Using the AirSwap technology including in the "tokenizing" will allow the emergence of a compliant secondary market. In other words, it will facilitate a peer-to-peer market for local assets online via blockchain.
The listing broker on the deal Ryan Serhant -- who is also the bestselling author of Sell It Like Serhant and star of Bravo’s Million Dollar Listing New York -- told Forbes that tokenizing will be beneficial and a better alternative to both developers and investors alike. Although the New York market is strong, it can take some time to sell the property for the right price in a new construction building according to him. He said the method of using blockchain to tokenize and sell property can remove "unruly pressure of traditional bank financing" and this is better for all stakeholders.
He says tokenization is "paving the way for a new forefront in real estate development.”
The partners are hoping that the use of blockchain will not only allow smaller-scale investors to dip into real estate investments but also the use of blockchain will help digitize the market and create a more transparent process.
CEO of Propellr Todd Lippiatt told Forbes that traditional securities structures and issuance frameworks have not evolved in a long time and blockchain can solve the "information asymmetry" that hinders the market potential for liquidity. He added that with "proper discipline and respect" the "future is bright" for tokenized securities.
The tokenization structure was published in The Two Token Waterfall framework, which can be applied for a broad spectrum of assets in the real world and has the potential to improve the liquidity of private securities while ensuring transparency.
Many other real estate professionals are of the opinion that blockchain will disrupt real estate even as platforms continue to evolve to facilitate tokenized real estate transactions and purchase of or investment in real estate with cryptocurrencies and tokens. For instance, Propy, a platform that brings together buyers, sellers, brokers, and agents in real estate creates a decentralized title registry.
However, while the number of platforms that allow for tokenization of real estate property is many, they are yet to see breakthrough in the market in terms of amount of investments and tokenizations mostly because they are young in the sector (most having finished their ICOs this or last year and in the initial stages), although there obviously are other concerns. Not only does tokenization allow for ownership, but also is being explored in property renting for P2P rentals, as well as holiday stays or accommodation.