Digital real estate shares allow investors to buy fractional shares of a property, become partial owners of the asset, and participate in the cash flows and asset appreciation. Digital shares are issued through a blockchain platform and can be traded amongst investors similar to the way that shares in Amazon or Beyond Meat are traded on major stock exchanges.
Three digital real estate deals to know
Investing in real estate using digital shares isn’t some futuristic idea; sales are happening as we speak. Here are three recent real estate transactions using digital shares that investors need to know about:
St. Regis Aspen Hotel
Last October, 18.9% of the St. Regis Aspen resort hotel was sold for $18 million using digital real estate shares (tokens). Shares for the 179-room luxury hotel were priced at $1 each and sold in lots of 10,000 to accredited investors. Owners of the property had at first planned on taking the hotel public through a traditional IPO on the New York Stock exchange but decided on digitizing the sale of this trophy asset instead.
The president of the group that owns the remaining shares of St. Regis Aspen told the Aspen Times, “We saw that doing an IPO was not scalable through the traditional route. Seeing where the blockchain market was heading, we saw the opportunity to be first-movers with our token offering for the St. Regis Aspen.”
South Carolina Student Housing
Venture capital fund Andreesen Horowitz has already made a name for itself by making significant cryptocurrency and blockchain investments. Proptech start-up Harbor is a company founded by PayPal executive David Sacks and funded by Andreesen Horowitz. Harbor recently announced plans to partner with Convexity Properties to launch the digital security token sale of a student housing complex in South Carolina.
A minority stake in the student housing complex is being sold via an ICO (initial coin offering) of 995 tokens priced at $21,000 each to accredited investors in the U.S., British Virgin Islands, Hong Kong, and Singapore. The fractional ownership is designed to meet full regulatory compliance with the SEC.
Manhattan East Village Luxury Condo Project
The newly-built, 12-unit luxury condo property on 436 & 442 E 13th St in Manhattan’s East Village is the first major real estate asset in Manhattan to be tokenized. Recently appraised for $30 million, the developer of the project opted for financing using tokenization as a better alternative for the property and for investors than going the traditional bank route.
Ryan Serhant is the listing broker for the property. He explained to Forbes why digital real estate tokens made the most sense for the project:
“The market in New York is always strong, but it can take some time to sell for the right price in a new construction building. With blockchain tokenization, we can remove the unruly pressure of traditional bank financing, which is much healthier for the project and all of the stakeholders. Tokenization is paving the way for a new forefront in real estate development.”
More real-world assets are being securitized
Using digital real estate shares to provide fractional ownership of high-quality real estate assets is quickly gaining momentum. Digital shares for real estate investments backed with blockchain allow buyers and sellers around the world to trade 24 hours a day, 7 days a week, 365 days a year with nearly instantaneous settlement and no counterparty risk.
Before the launch of digital real estate shares, selling a fixed real estate asset required a significant amount of time and the right individual investor or limited group. Today, digital shares are being used to create fast liquidity by offering small pieces of property ownership to a wide spectrum of buyers.
