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Real Estate Fund First of Its Kind to be Regulated by the FMA

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liechtenstein

RE Fund

Europe has been noted as a leader within digital securities for months now.  Unsurprisingly, it is a European nation, Liechtenstein, in which a new tokenized real estate based fund has been launched.

The development of said fund was possible through the collaboration of two companies – Token Factory and Bank Frick.

Bringing to the Table

In this particular instance, each of the participating companies bring different specialities to the table, making the fund possible.

Token Factory
  • Tokenization capabilities
    • Sale, generation, and distribution of security tokens to investors, representative of ownership within the fund
Bank Frick
  • Investor on-boarding
    • On-chain whitelist populated by pre-approved investors having undergone AML/KYC measures

Regulated

What makes this particular fund interesting is its recognition by the Financial Market Authority of Liechtenstein (FMA).

The regulatory body designated the aforementioned fund as an ‘Alternative Investment Fund (AIF)’.  In doing so, the fund becomes the first of its kind to be regulated in such a manner within the continent of Europe.

Commentary

With the announcement of this new regulated fund, also came the commentary of those responsible.  The following is what representatives from each, Token Factory and Bank Frick, had to say on the matter.

Bastiaan Don, Managing Director of Token Factory, stated,

Our tokenization solution is based on standard protocols like ERC20 and an open Blockchain (Ethereum). This allows our customers to maximize the potential of Blockchain technology without having to commit to a central technology partner or proprietary (closed) solution.”

Raphael Haldner, Head Fund and Capital Markets of Bank Frick, stated,

As the preferred point of contact for Blockchain Banking, we were again able to demonstrate the possibilities of Blockchain technology with the tokenization of a regulated investment fund. The issuance of digital, Blockchain-based fund shares leads to greater efficiency and a higher degree of automation in the transmission process.

While evaluating possible technology partners, we were impressed by Token Factory’s team, their track record and their far-sighted and understandable tokenization solution.

We are pleased to take this step to further strengthen our service offering in the issuing business and are confident that we have set an important milestone for future developments.”

Popular Implementation

While digital securities hold the potential to transform many industries, to date, the world of real-estate has been the greatest benefactor.  Furthermore, although there are examples world-wide, Europe is most definitely leading the way.  The following articles are just a few examples of European real estate being tokenized.

BitBond and Klickown to Tokenize German Real Estate

Tokenized Real Estate on Ignis Blockchain

MBK Announces Real Estate Tokenization Project

Speaking with Bastiaan

We were fortunate to have recently interviewed Bastiaan Don through our on-going interview series, hosted here at securities.io.  In this exclusive conversation, Bastiaan Don discussed, not only his own entrance into blockchain, but how Token Factory hopes to develop the sector.

Interview Series – Bastiaan Don, Managing Director of Token Factory

Token Factory

Founded in 2018, Token Factory maintains headquarters in Zug ‘Crypto Valley’ Switzerland.  This forward thinking company is currently comprised of multiple branches, which address different market needs.  These include Blockimmo (RE Tokenization), and STX.Swiss (secondary market trading).

Managing Director, Bastiaan Don, currently oversees company operations.

Bank Frick

Founded in 1998, Bank Frick maintains headquarters in Balzers, Liechtenstein.  Above all, the company works to provide bridging services between traditional, and blockchain based, banking.

CEO, Edi Wogerer, currently oversees company operations.

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

Real Estate

Japan to See Real Estate Tokenized through New Platform

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Collaborative 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.

Proven Results

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)

Prime Target

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.

Smartlands to Tokenise Nottingham Real Estate through STO

Flyt Property Brings First Tokenized Real Estate STO to Aftrica

Luxembourg Home to Real Estate Successfully Tokenized through Tokeny

Commentary

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.”

Securitize

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.

LIFULL

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.

Japanese Growth

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.

Securitize Increases Ties to Japan through First Acquisition

Securitize to Expand within Japan after Recent Investment

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Real Estate

KlickOwn Partners with Netfonds on New Tokenization Platform

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KlickOwn Partners with Netfonds AG

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.

KlickOwn Platform

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.

Significant Milestone

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.

Stellar Blockchain

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.

KlickOwn Founder Wladimir Huber

KlickOwn Founder Wladimir Huber

Netfonds

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.

Direct Management

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.

Peer Reichelt - CEO of Netfonds AG

Peer Reichelt – CEO of Netfonds AG

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

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.

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Real Estate

Connecticut Real Estate Tokenized by REINNO

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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.

Debt Instrument

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.

  1. REINNO tokenized the entirety of the commercial property.
  2. The property owners may now choose as many tokens needed to be used as a pledge/collateral for their desired capital loan.
  3. 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.

Unique Perks

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.

Commentary

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.”

$105M Fund

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.”

$105M STO from REI Tokenized by REINNO

REINNO

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.

Flyt Property Brings First Tokenized Real Estate STO to Africa

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