Tokenizing Commercial Real Estate — An Overview

Find out more at www.axpire.io
  • Tokenization is the process of representing fractional ownership interest in an asset (utility asset or security asset) with a blockchain-based token
  • Real estate tokenization, therefore, is the process of representing an ownership interest in real estate with a token. The detail here is what the token truly represents; tokens can represent ownership in the underlying asset, equity in a legal structure that owns the asset, an interest in debt secured by the real estate, a stream of income based on cash flows from the asset, and the list goes on!
  • This isn’t real estate specific, necessarily; it applies to all illiquid assets
  • Tokenization created liquidity: the investment pool for tokens is truly global (anyone that meets capital requirements and has an internet connection can invest)
  • Lower investor barriers: The barriers for investor entry will likely be lowered as real estate assets become more liquid, the accredited investor restrictions may view tokenized real estate in a more liquid light — that 8.25% of all U.S. households would expand massively
  • Programmable securities: tokens can be allocated / managed through smart contracts that would automatically enact important processes, e.g. automated dividend payout through smart contracts, which would reduce costs. Even if some manual work was required, it would be less relative to not having smart contracts involved
  • Security and immutability — cryptographic encryption protects these assets, and blockchains tracking the tokens are append-only, meaning everything that has happened in the past is public to anyone who might want to look, and that includes the regulators
  • What does the token truly represent (shares in a special purpose vehicle that own the real estate? a right to cash flow from a property?)
  • Security regulations (is this a Reg D offering? Reg S? Reg A+? have you spoken with a relevant representative to confirm compliance if not a traditional exemption?)
  • Have you conducted KYC/AML/Accreditation? Does this just apply to U.S. KYC/AML/Accreditation or is it compliant globally?

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