One of the leading tokenization platforms, Harbor announced this week that they successfully tokenized $100 million in real estate funds. The firm tokenized four major funds with the goal to increase liquidity for investors. The move showcases growing interest by investors towards more liquid alternative investments.
As part of the tokenization, Harbor provides investors with access to an iCAP-branded platform and private marketplace for secondary transfers. Here, investors can trade their securities in full compliance with the SEC. Speaking on the decision, Harbor’s CEO, Josh Stein described the maneuver as the natural evolution.
The tokenized real estate fund includes a mash-up of 17 broker-dealers, a myriad of placement agents, and approximately 1,100 private investors. Importantly, iCAP Equity is the fund’s manager.
iCAP’s CEO, Chris Christenson spoke on the decision in detail in a recent interview. Here he explained why it was important to create the best investment experience possible for his clients. In his words, the best way to accomplish this monumental task was “providing liquidity for them.”
Harbor Tokenizes Funds on Ethereum Blockchain
Harbor chose Ethereum’s ERC-20 standard for the tokenization of the funds. Importantly, the ERC- 20 token standard is the most popular in use today.
More than Issuance
Stein envisions Harbor as more than just an issuance platform. Now, the company seeks to provide businesses with a solid tokenization infrastructure. In this manner, companies can tokenize their existing assets.
Stein explained that the demand for newly issued tokens was far less than previously expected. Interestingly, Harbor noticed that ICO investors were of the speculative nature versus more traditional alternative investments.
Tokenizing Existing Assets
Notably, Harbor discovered that tokenizing the cap tables of existing assets provides a clear benefit to everyone involved – sponsors, placement agents, and investors. They are also more geared towards the traditional investment community.
Harbor Tokenizes Shares to Add Liquidity to the Market
Traditionally, securities investors agree upon a multi-year lockup. Basically, you can’t sell your shares until an agreed-upon date. The problem here is that in many instances, investors need to access those funds for certain reasons prior to the agreed-upon date.
In the traditional system, an investor would have to wait out the years until granted sales access or find an investor willing to take over the waiting period. Harbor’s platform does away with this nonsense and allows investors to trade their tokenized shares as soon as the SEC mandatory one year lockup period ends.
Experience Equals Lessons
Like any true pioneer, hard lessons were part of the learning process. Last year, Harbor attempted to issue tokenized shares in an apartment building. While the concept was solid, discrepancies arose between the mortgage lender. In the end, the deal was scrapped before launch.
Harbor Tokenizes the World
Harbor appears to have the flexibility and forward-thinking needed to adjust to the ever-changing crypto landscape. You can expect to see more major players in the tokenization sector begin to duplicate this strategy in the coming months. For now, Harbor appears to be a step ahead of the curve.
Japan to See Real Estate Tokenized through New Platform
With an abundance of uninhabited homes lining rural regions of Japan, an opportunity was presented to those that looked closely. As a result, an ambitious company, by the name of LIFULL, saw this and set out on a path that would see these homes revitalized. In doing so, lucrative investing opportunities would arise, while providing affordable housing to those that need it.
In a move to fund their efforts, and overall goals, LIFULL partnered with blockchain tech provider, BUIDL. This partnership opened the doors for digital securities, and investing through fractionalized ownership of real estate, by developing a ‘funding platform’.
In the time since, BUIDL has been acquired by Securitize. This, however, has not had a negative impact on the previously established project. On the contrary, Securitize has taken a stance indicating that they will continue to back this promising project.
What is notable about this particular collaboration is that the benefits, often touted by those pro-security tokens, were proven to be true. This move is not being made on the possibility of realized potential, but due to verified benefits.
The companies noted that through the initial stages of the endeavour, these benefits were most obvious in four scenarios. The following is an excerpt from their release, describing just what these were.
- Verification of operational cost reduction by automatic execution of security token distribution, dividend and redemption by smart contract
- Distribution of security tokens triggered by deposit data obtained from Bank API (GMO Aozora Net Bank, Ltd.)
- Using smart contracts on the blockchain to automatically execute dividends and redemptions according to the ownership ratio of security tokens
- Investors and third parties can check the operation of the above smart contract and the flow of funds and tokens in a public, tamper-resistant public chain (Ethereum mainnet)
To date, there seem to be extreme mentalities surrounding digital securities. While some are content with their belief that only a select few asset classes stand to benefit from tokenization, there are others that believe everything of value will one day be represented by a token.
One thing that all appear to agree on, is that real estate is a perfect testing ground for demonstrating what digital securities can bring to the table.
This agreement has been made obvious through moves made, not just by Securitize, but through various industry participants on a global scale. The following are a few examples of this.
Upon announcing this new project, representatives from each, LIFULL and Securitize, took the time to comment. The following is what each had to say.
Tsunahiro Matsuzaka, Project Manager at LIFULL, states,
“We have learned a lot from the work we did with BUIDL. We will continue to work with Securitize to build a future where real estate is tokenized and everyone can trade freely.”
Carlos Domingo, CEO of Securitize, states,
“Our collaborative success in creating a comprehensive platform solution for crowdfunded real estate funds is very exciting, and it is a great start for Securitize and LIFULL as we work to modernize the Japanese real estate market together.”
Founded in 2017, Securitize is a tokenization platform, which maintains operations in the United States. Since launch, Securitize has gone on to establish themselves as a clear leader in the digital securities sector, partly thanks to strategic partnerships such as the one discussed here today.
CEO, Carlos Domingo, currently oversees company operations.
Founded in 1997, LIFULL maintains operations out of Tokyo, Japan. Above all, the company specializes in real estate revitalization projects, in addition to related ancillary services.
President, Takashi Inoue, currently oversees company operations.
In the past year, Japan has shown noteworthy levels of adoption surrounding digital securities. One of the reasons for this is the increased presence of industry leader, Securitize. The following are multiple articles discussing past events involving Securitize and their expansion into Japan.
KlickOwn Partners with Netfonds on New Tokenization Platform
This week, Hamburg-based tech startup KlickOwn announced the formation of a strategic partnership with the leading financial platform Netfonds AG. The maneuver is part of larger plans to launch a blockchain-based management and marketing tokenized real estate platform. The news demonstrates further tokenization in the EU market.
The updated KlickOwn tokenized real estate platform will allow investors and property owners to conduct business via the blockchain. As such, the platform will allow for the tokenization of properties, the issuance of security tokens, and the management and trading of these financial instruments.
Speaking on the partnership, KlickOwn founder and CEO Alexander Braune called the move a significant milestone in the market. Additionally, he described how the partnership moves the firm closer to its overall goal to democratize capital investments in real estate. He also touched on the years of experience Netfonds possesses and how this experience aligns with KlickOwns strategy.
Interestingly, the project represents one of the first tokenized real estate ventures on the Stellar blockchain. Stellar is an open-source, decentralized payment protocol that allows for fast, cross-border transactions between any pair of currencies. Additionally, as a fourth-generation blockchain, Stellar provides advanced smart contract programming capabilities.
The decision to utilize the Stellar blockchain opens the KlickOwn platform up to a host of new functionalities. For one, it provides very low transaction costs. Most importantly, Stellar is decentralized and is a non-profit company with altruistic goals as opposed to a general profit-making strategy
Gain Security and Efficiency – KlickOwn
Also discussing the maneuver, Wladimir Huber, founder and board member of KlickOwn praised his firm’s cooperation with Netfonds. Importantly, he took a moment to describe the new product and some of the advantages tokenization brings to the platform. He explained that users gain the same advantages as a classic bond but without all the extra costs normally associated with these transactions. Specifically, the new system eliminates the need for global certificates or costly bank deposits.
For its part, Netfonds will lend their expertise as a regulatory service provider. As such, the firm will handle the regulatory function of the liability umbrella, and the structuring and approval of the bonds managed on the blockchain. Lastly, the firm will be responsible for the digital asset management phase as well. To accomplish this task, both firms plan to cooperate closely with NSI Netfonds Structured Investments GmbH. Notably, NSI Netfonds Structured Investments GmbH is a subsidiary of Netfonds AG.
In a recent interview, Peer Reichelt, CEO of Netfonds AG discussed the project’s potential. He explained that the new platform allows for the direct management and brokerage of real estate investments. Additionally, he spoke on how the new platform will enhance the positioning of Netfonds’ real estate division. Specifically, Reichelt believes the new platform will expand the firm’s real estate sales division and lay the foundation for a new digital business model.
Investors looking to participate in the KlickOwn tokenized real estate STO can do so by going directly to the firm’s website. Here, you can easily purchase digital real estate bonds after filling out the required registration information. Notably, the minimum investment amount is only 10 euros. Additionally, the platform provides you with a variety of ways to pay for your new tokenized bond, including using a classic SEPA bank transfer.
Lowering the Entry Bar – KlickOwn
One of the most important aspects of the KlickOwn concept is the desire to make real estate investing available to anyone. The platform’s minimum investment level of just 10 euros makes this dream a reality. In this way, international investors can easily participate in the German real estate market without worrying about minimum funding barriers.
Previously, investors needed to provide a significant amount of funding to participate in international property sales. In most instances, these exclusive investments were only available to accredited investors. An accredited investor is someone who has at least $1 million in liquid assets. Unfortunately, this strategy left both investors and property owners suffering.
For one, most investors lacked the funding to participate. Consequently, these investors needed to go elsewhere to participate. In many instances, they were forced to invest in less desirable and riskier ventures. Simultaneously, property owners often turned away funding because it didn’t meet the necessary minimum requirements. Luckily, KlickOwn’s platform eliminates all of these issues.
KlickOwn on the Future
The platform currently offers only tokenized properties in Germany. In the coming months, the firm may expand to other EU markets. Currently, investors receive fixed interest payments for their participation. According to company documentation, the firm intends to offer separate digital real estate bonds with corresponding BaFin-regulated security tokens for each real estate project.
Netfonds provides administration, advice, transaction processing and regulation for the German financial industry. The firm utilizes a web-based technology platform that enables users from the financial industry to process financial market transactions fully, securely and while remaining in compliance with EU securities regulations. The firm’s clientele includes fund companies, asset managers, financial advisors, special banks and insurance companies.
Tokenization Takes the Real Estate Markets by Storm
This news is just the latest in a long list of firms tokenizing real estate funds. Just this week, Red Swan partnered with the tokenization giant Polymath. The pair successfully tokenized $2.2 billion in properties as part of their first venture. Every day more tokenization platforms enter the real estate sector.
In the past, many of these projects have fallen to the wayside due to paperwork or funding issues. Now, for the first time, real estate firms are partnering with tokenization platforms to ensure their products and market approach are tailored to the real estate sector. Consequently, there is an influx of tokenized properties making their way to the public in the coming weeks.
For now, KlickOwn appears to have a jump start on the rest of the EU market. You can expect to see the firm capitalize on this lead as the company continues to expand its products and marketing.
Connecticut Real Estate Tokenized by REINNO
Connecticut has recently become home to one of the first commercial properties to undergo tokenization in the United States.
REINNO, real estate tokenization specialists, have just announced the successful creation and issuance, of security tokens, representative of this property; A process which demonstrated clearly what REINNO is able to offer its clients.
While the digital securities sector is still young, we have seen various properties tokenized, both residential and commercial. This has provided accredited investors around the globe with access to potentially lucrative opportunities that they would not have otherwise.
In this particular instance however, the owners of the $2.5M property having undergone tokenization, have no intention of selling their property. Rather, they were looking for a loan.
Similar to companies like BlockFi and Celsius, REINNO is able to provide capital loans to borrowers by taking some form of collateral in return. With regards to this Connecticut based property, a multi-step process was used to facilitate such a loan.
- REINNO tokenized the entirety of the commercial property.
- The property owners may now choose as many tokens needed to be used as a pledge/collateral for their desired capital loan.
- REINNO facilitates the loan, structured on their unique risk assessment
Naturally, each of these companies offering loans utilize unique risk models, when assessing a potential loan, as the assets being put forth as collateral differ greatly.
By structuring the tokenization in such a manner, the borrowers/property owners stand to benefit on multiple fronts.
While they are obviously still on the hook for repaying the loan, plus interest, borrowers can expect to benefit from:
- Increased rate of approval
- Structuring flexibility
Speaking with REINNO CEO, Viktor Viktorov, he states that much of this flexibility is owed to the fact that borrowers can choose how much of their, now tokenized, property they would like to put forth as collateral.
With the tokenization taking place to facilitate a loan, this also means that there was no STO required, as financing was handled in-house. This greatly expedites the process of attaining capital, and saves money for deals such as this.
When it is all said and done, with the loan being repaid – collateral is returned, and the borrower has retained their asset.
Upon announcing the tokenization of the aforementioned property, the co-founders of REINNO each took the time to share their thoughts.
Viktor Viktorov, CEO & Cofounder of REINNO stated,
“That is where REINNO stands out. Unlike its competitors, REINNO provides not only tokenization but also additional services, from regulatory compliance and legal structure to lending against real estate tokens to create liquidity”
Barry Monies, Cofounder of REINNO, stated,
“Thanks to tokenization and our proprietary lending platform, leveraging an equity investment and pledging tokens to take a loan is possible in just a few minutes…Moreover, fractional ownership makes it possible to use a portion of tokens as collateral rather than putting a lien on the entire property.”
The development discussed here today comes right on the heels of REINNO’s first $105M fund, announced in late January 2020 in conjunction with REI Capital Growth.
This was a fund that was structured in a manner providing investors access to equity or debt in a fund populated by various pieces of U.S. based real estate.
Investors will be happy to hear that REINNO has managed to establish a partnership with security token exchange ‘ADAX’. In doing so, they will benefit from the much sought after liquidity which is often associated/promised with security tokens.
Viktor Viktorov, CEO of REINNO, states,
“…we are excited to have partnered with a fully-regulated security token exchange to create greater liquidity for investors.”
Founded in 2019, REINNO maintains operations in Connecticut. The team behind REINNO has developed a platform, and series of services, which merge real estate with tokenization.
CEO, Viktor Viktorov, currently oversees company operations.
In Other News
Connecticut is not the only region to begin seeing the benefits of real estate tokenization. For instance, we have seen the practice ramping up in Europe, and most recently in Africa. Peruse the following article to learn more about how Africa stands to benefit from the tokenization of real estate.
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