Update on tokenized real estate activity

Article written by DAN NATALE, Partner at
SEGAL LLP
in the Quarterly Review of Canadian News, a newsletter published by
Canadian member firms
of
Moore North America
. This article on real estate activities and their transformation into tokens is part of our mission to become the partner of choice for your success by keeping you up to date.

Real estate market 2022

The current market capitalization of tokenized real estate is currently estimated at $210 million. Most of these activities originated in the United States. As many are forced to recognize, the real estate market is highly competitive, so the aim is to democratize real estate investment opportunities even further. This is where new technologies come into their own. We expect the market capitalization of tokenized real estate assets to grow exponentially in the short term.

Real estate market trends and tokens

For example, RealT and Red Swan CRE Marketplace are two platforms that offer individual investors the opportunity to participate in real estate tokenization platforms in the United States. As real estate prices continue to rise across all asset classes, the opportunity to invest in fractional real estate ownership offers investors the chance to participate in a way that is currently unavailable in more traditional investment structures. The biggest hurdle is the minimum investment required by more traditional single-purpose real estate investment funds.

Increased yields

Why are these platforms being created? Issuers incur lower transaction costs, which can lead to higher returns for investors. The use of blockchain technology enables real-time monitoring of capital structure tables. Tokens issued on an open blockchain make property distribution visible to all.

Issuers are primarily offering an equity stake in a property, but we’re now also seeing the possibility of investing in debt. SolidBlock is currently offering London digital bonds, secured by London properties on the Atlas One platform to eligible investors.

As we monitor activity in this area, we’ll see how other countries such as Canada, the UK, Germany and other developed real estate markets are embracing this new investment tool. Regulators in these markets strive to understand these structures and provide the appropriate level of oversight.