Investing in the Future
Bauwens Group, a German based real estate developer, has announced that they have invested in Fundament Group.
With Fundament Group looking to change the way real estate projects are financed, through the implementation of blockchain technologies, they caught the eye of Bauwens Group. The latter has recognized the potential cost savings, and ease of access to capital, that blockchain can offer.
Real estate continues to be a popular implementation for the tokenization of assets, and the entrance of a giant developer such as Bauwens Group continues to support this.
The investment in Fundament by Bauwens is just the latest in a recent string of positive news surrounding the company.
We recently covered Fundament Group, and their approval by BaFin, for an upcoming STO involving German real estate. The following article discusses this in greater detail.
Upon making their announcement, Alexander Jacobi, Managing Director at Bauwens, took the time to comment on the investment. The following is what he had to say on the matter.
“We are delighted to announce this partnership with Fundament Group which recently achieved a decisive breakthrough in Germany by securing the first regulated tokenized real estate bond. The Fundament Real Estate Token is an extremely interesting option for selling our real estate and we are proud to support them with our real estate and digitization expertise. By partnering with Fundament Group, Bauwens is positioning itself sustainably in the emerging real estate tokenization market.”
One of the reasons that Germany has started to become popular for developments, such as the one discussed here today, is clarity afforded to industry participants by their regulators. The following article takes a look at some of the steps necessary for getting regulatory approval for a German based STO.
This Berlin, Germany, based company was founded in 2018. Since launch, the team at Fundament Group have worked to create a comprehensive platform tailored towards the tokenisation of assets, such as real estate.
CEO, Thomas Ermel, currently oversees company operations.
With almost 400 employees, and billions worth of real estate under their management, Bauwens Group represents one of the largest real estate developers in Germany. The company has grown to such stature since their founding almost 150 years ago in 1873.
In Other News
To date, Germany has continued to be one of the more forward thinking countries with regards to digital securities. This has been made apparent through parties from various sectors showing interest in blockchain. This includes, not only real estate, but big banks as well, with the following articles demonstrating this.
Oliver Siah, CEO of Fraxtor Capital – Interview Series
You have an interesting and diverse life story, having spent 17 years in the civil service as a Republic of Singapore Air Force Officer, and Pilot. How did you transition from such a career to launching your first real estate investment company Hanson Court Pte Ltd?
I had two passions growing up. One was Aviation, and the other was Real Estate Investment. I enlisted as a pilot in the Air Force when I was 19 years old and was offered a government scholarship to further my studies in Australia. At 21 years old, I bought my first commercial real estate, which was a retail unit in a shopping mall in Singapore. By the time I graduated at 23 years old, I had sold the retail unit for about double the purchase price, netting me more than 10x return on equity. I was so intrigued by this that I could not wait to buy my next property, this time, a residential unit in Singapore. I sold this unit six years later for more than double the purchase price as well.
I knew I was on to something. So I set up my family investment vehicle Hanson Court Pte Ltd (named after the first property we acquired) after completing my Pilot training in the Air Force in 2009 (during the financial crisis). We went on to buy ten commercial and industrial units in Singapore, with a strategy to add value to the assets through asset enhancement. By doing so, we managed to push the rental income up substantially and sold the units five years later, achieving more than 40% IRR (p.a.).
After serving for 17 years, in 2018, I left the Air Force to focus on my startup Fraxtor.
In order to familiarize our readers better, could you share with us what Hanson Court Pte Ltd does?
Hanson Court Pte Ltd was formed as a property investment company in Singapore. During the financial crisis in 08/09, we acquired many commercial and industrial assets for below valuation and held on to them until the market recovered, earning us more than 40% IRR. At the moment we are still invested in commercial units in Singapore and have also ventured abroad to China to develop properties.
Was there something that your saw or experienced operating Hanson Court that inspired you to launch Fraxtor, a company that specializes in offering tokenized and crowdfunded real estate?
Through my experience investing in property, I realised that some pain points could be addressed through tokenisation. First, it was the large capital outlay that is required to purchase a property which makes it difficult for investors to diversify their portfolio. Second, it was the lack of liquidity of the investment, which makes it prohibitive for people who want to invest in the short term. Third, it was gaining access to the global real estate market. The know-how required to conduct the due diligence on the property and even to structure the investment makes it difficult for individuals to invest overseas.
With a platform like Fraxtor, we can allow investors to co-invest with us from as low as $10,000 and enjoy a hassle-free investment experience.
Could you elaborate on how Fraxtor sources which property to invest in?
We currently focus on opportunistic and value-add projects in matured markets like Australia, Japan, Singapore and Europe (including the UK). These are markets that our team is more experienced as well.
First, we look at two key factors: location and potential. Location is something we cannot change. Hence it is essential to select projects based on the accessibility and desirability of the asset’s location. Potential is what we can unlock in the property through redevelopment or asset enhancement initiatives. This we feel would be the allow us to increase the value of the property.
Next, we look at the financial structuring of the asset. We look at the best way to structure the capital stack of the investment to maximise the return for the investor. In the current market situation, we are looking at 10+% IRR for value-add projects and 15+% IRR for opportunistic projects.
Projects that meet our criteria would be presented to our investment committee for selection.
How long are the properties held? Is the goal to tenant them, or to flip them for capital gains?
The duration of the holding period depends on the type of property and the strategy we adopt. For our development projects, we aim to sell the assets as soon as possible to unlock the return for our investors. This would probably take between 1.5 to 3 years. For our investment projects, the goal is to add value to the assets through enhancement initiatives, increase the net operating income and subsequently sell them for capital gains. This would take between 3 to 5 years.
Are monthly or quarterly updates issued to investors? What type of information can they access?
Investors are updated as and when there are updates on the property. Investors are able to access the information memorandum for the property as well as the financial feasibility study that we had done for the project.
Where is Fraxtor regulated and what licenses does it have?
Fraxtor is currently exempted from licensing in Singapore as we only deal with accredited investors.
Could you tell us about some of the current investments that you offer, such as the location and property type?
Our current project is to redevelop a residential landed property in Singapore. The property is situated in Adelphi Park Estate along Upper Thomson Road. We plan to demolish the existing property and build two semi-detached units on the land.
Is there anything else that you would like to share with our readers?
Fraxtor will be expanding our operations in Australia soon and we are in the process of obtaining an Australian Financial Services Licence.
Byte-Sized Investing with Fraxtor
Democratic Investing with Fraxtor
Another company is looking to make their mark on the digital securities sector, as they ramp up operations surrounding their real-estate investment platform.
Naturally, as these types of investments represent ownership in an underlying asset, with an expected positive return over time, the Singaporean government views them as securities. What this means is that participation is restricted to accredited investors only, at this time.
Fraxtor notes a distinction in what separates their projects apart from others. Specifically, the vast majority of real estate based investment opportunities are restricted to developed properties. While these may represent great investments, the ability to gain exposure to such an asset on the ground floor typically proves to be more lucrative in the long run.
The issue with this, however, is that the amount of funds needed to invest in yet-to-be-developed properties is financially prohibitive. The result is that these opportunities are typically restricted to large property developers, not retail investors.
Fraxtor saw this, not as a problem, but as an opportunity to leverage the capabilities of digital securities, bringing the masses access to such investments; essentially democratizing real estate investing.
Representatives from each, Proptech and Fraxtor, took the time to elaborate on the need for their solutions, and how they will work.
Oliver Siah, CEO of Fraxtor, states,
“Investing in premium real estate is often out of reach for the average investor as it requires high capital outlay and is very illiquid. This makes property investment riskier for investors as they are not able to effectively diversify their portfolio. REITs, on the other hand, do not provide the returns that Private Equity Real Estate Funds can achieve. With Fraxtor, I hope to be able to democratize real estate investment…We have placed a digital wrapper around a physical asset which allows us to issued digital securities to our global investors so that they are able to participate in that particular investment.”
Jordan Kostelac, Director of Proptech, states,
“Now everyday investors like you and me can actually own a piece of grade A office tower in the biggest cities in the world. From an asset holder standpoint, it creates new sources of liquidity and allows them to improve that asset or creating yields from that asset by dividing up the ownership. In the same way as companies do in public offering of their equity.”
To date, Singapore has established themselves as one of the leading countries, with regards to acceptance of digital securities. Not only does the Monetary Authority of Singapore (MAS) host a FinTech Sandbox, they have been quite forward thinking with their endorsements towards companies such as iSTOX. Check out the following articles to learn a bit more about a few Singaporean based endeavours.
Operating out of Singapore, Fraxtor was founded in 2017. This young company specializes in bringing real estate based investments to the masses, through the use of blockchain based technologies.
CEO, Oliver Siah, currently oversees company operations.
Tokenizing London Penthouses and Greek Island Villas
Luxury Real Estate
With multiple STOs already on the docket from a variety of asset classes, Smartlands has just announced a new collaboration, which will, hopefully, see the addition of multiple more. This move sees the UK based company partner with Sotheby’s International Realty.
This collaboration will see the pair explore the feasibility of tokenizing multiple pieces of luxury real estate. The company notes two specific properties as holding the potential for tokenization.
- Greek Islands Villa
- London Penthouse Apartment
While details on the STOs are scarce, for the time being, it is indicated that the Greek Islands Villa is under management by a world renowned hotel network.
This collaboration spurred Smartlands’ Executive Director, Katharine Manderfield, into commenting. She stated that, “Deals of this level of exclusivity will open a new page in asset tokenisation.”
While many are still figuring out their first steps within the world of digital securities, Smartlands remain one of the few companies to have successfully completed an STO. Not only that, but they are now moving on to subsequent opportunities.
Like any experiences, they have the ability to shape our future actions. Expect Smartlands to learn from their past capital generation events, and apply that knowledge to the development discussed here today. The following articles take a brief look at just what these previous successes were.
Due to the nature of real estate, it has caught the attention of various tokenization platforms from more than just the United Kingdom. While there have been hiccups along the way – such as the failure of Fluidity and Propellr – real estate continues to be one of the more lucrative industries, which stands to be transformed by digital securities.
Despite beginning to branch into different sectors, such as commodities and disruptive start-ups, expect for real estate to remain a popular outlet on Smartlands’ path to reaching the goal of tokenizing $1 billion in assets.
Speaking with Arnoldas
Roughly 6 months ago, we were fortunate enough to have completed an exclusive interview with the then CEO of Smartlands, Arnoldas Nauseda. While he has since transitioned into the role of Chairman, our discussion with Arnoldas Nauseda remains relevant today, offering a glimpse into Smartlands operations.
Sotheby’s International Realty
Founded in 1976, Sotheby’s International Realty is a United Kingdom based company. While many associate the name Sotheby exclusively with fine art, there are company branches, such as Sotheby’s International Realty. This branch specializes in facilitating the buying/selling of real estate, with a presence in over 60 countries.
CEO, Philip A. White, currently oversees company operations.
Founded in 2017, Smartlands is a tokenization platform, which operates within the United Kingdom. Through use of the Stellar blockchain, this forward thinking company has developed a variety of solutions built to make fractionalized ownership of real world assets accessible to the masses.
CEO, Ilia Obraztsov, currently oversees company operations.
In Other News
Not content with opportunities based solely in the United Kingdom, Smartlands recently took their first steps towards operating within the United States. These steps were taken by forming an alliance with a U.S. based broker/dealer, bringing support for state-side investors on their platform.