November 5, 2019
It is not a secret that the real estate industry have been dipping their toes in the blockchain waters rather actively throughout the last few years. However, the numerous projects that tried to form a symbiosis between the business of property development, which is looking for new ways to evolve after having recovered from the economic crisis of 2008, and the blockchain technology were not particularly successful. One of the main reasons for that was the absence of partnerships with high-end construction and real estate investment companies. Many concepts regarding the tokenization of the real estate items have been presented, but virtually none of them came to fruition, until now.
In its latest press release, tZero, a renowned developer of blockchain solutions for capital markets, founded by Arthur Breitman, a former analyst at the investment bank Morgan Stanley, announced that their foundation has partnered with Alliance Investments, a Manchester-based property investment bank, one of the biggest in the UK. As per this agreement, tZero will provide means for tokenizing a piece of real estate evaluated at approximately $25 million, at the initial phase. The first real estate object in the line is called River Plaza, a luxury residential development that contains 180 apartments and commercial properties, which is currently under construction. However, this would be only the first part of the deal, which stipulates for the tokenization of $600 million worth of property by virtue of Tezos blockchain.
The tokenization process would include the organization of the security token offering (STO), where all of the features tokens would be 100% backed by a piece of real estate. River Plaza represents a pilot project aimed at affording investors a chance to acquire the additional liquidity thanks to the employment of tZero's unique trading system that had been developed by the company's subsidiary named PRO Securities LLC. The tokenized property shares are going to be issued on the Tezos blockchain, the digitizing capabilities of which had received acclaim from other renowned investment firms like Elevated Returns and BTG Pactual. Also, both parties will rely on Megalodon Capital Management for consultations regarding compliance and STO conduction. The actual token sale is expected to take place in the first quarter of 2020.
This tokenization effort would mark the first steps to the road to conquering the market, the value of which is estimated at $200 trillion, roughly two-thirds of the total world's assets. But the problem is that the overwhelming majority of those assets aren't accessible to non-institutional investors, which significantly hampers the market liquidity. The partners in this deal believe that their tokenization initiative would become a gateway for the investors who are interested in this particular sector but had been deprived of any means for entering it.
The offered security tokens will be structured to serve various purposes. For instance, it could represent equity in a company that owns the property, serve as an instrument for obtaining income from the cash flow or capital growth related to the asset. Saum Noursalehi, the CEO of tZero, said that their joint venture would disrupt the real estate space and raise the trust in cryptocurrencies.
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