In recent years, blockchain technology has brought innovation to the real estate industry, offering opportunities for both investors and asset owners. Let’s have a look at two successful case studies that highlight the power of tokenization in real estate developments.
One pioneer in this space is BrickMark, a Switzerland-based company that utilized blockchain to transform the traditional real estate market acquisition.
In 2020, BrickMark acquired a commercial building from RFR Holding. What set this transaction apart was the method of payment – BrickMark partially utilized its proprietary tokens, created on the Ethereum blockchain, to purchase the property for a total of 130 million CHF. RFR Holding accepted as a payment method a portion of the newly created BrickMark Tokens. This was registered as the largest token-based real estate transaction in history.
Following the acquisition, BrickMark established an Equity REIT, a type of investment product that allows investors to pool their funds to invest in income-producing real estate. Investors in BrickMark’s Equity REIT –RFR Holding and future investors – received participation bond tokens -BrickMark Tokens-. These tokens provide its holders with the right to a share of the profits generated from the rental of the newly acquired building, as well as any future price appreciation from the increase in value of the property itself.
In the case that the tokens become illiquid, BrickMark can retire the tokens and sell the underlying asset. This protects both RFR Holding and other token investors, ensuring that they can exit their investments without incurring significant losses.
BrickMark’s token model shows how blockchain technology can streamline transactions and provide investors with greater flexibility. This represents just the beginning of what is possible with blockchain technology.
Another interesting case study is the platform Finexity. Based in Germany, Finexity has quickly gained traction, providing investors with diverse investment opportunities through its digital platform, focusing particularly on tokenized debt. With over 115 investment opportunities listed, including multiple projects in real estate, Finexity focuses its success on the implementation of blockchain.
Finexity helps real estate developers to raise funds for their projects, offering investors the chance to participate in club deals and other exclusive investment opportunities. Through its platform, Finexity creates a special purpose vehicle (SPV) for each investment project. This SPV then acquires the physical assets such as real estate properties, enabling investors to gain exposure to these assets through tokenized subordinated debt issued by the SPV.
As mentioned, the core of Finexity’s platform lies in blockchain technology. The company developed an efficient infrastructure for tokenizing subordinated debt. By tokenizing these assets, Finexity enhances liquidity and transparency while streamlining the investment process for its users.
Investors interested in participating in Finexity’s investment projects undergo an online KYC process and open an account with Mangopay, where they deposit fiat currency. Once the investment process is complete, investors receive their tokens directly into their blockchain wallets, ensuring secure and transparent ownership of their assets.
In addition to offering primary investment opportunities, Finexity provides investors with access to a secondary market where they can trade their tokenized assets. These secondary market opportunities help overcome the lack of liquidity and flexibility for investors, a major challenge for investment platforms. Secondary markets are more easily provided by platforms that tokenize their assets in primary issuance since investors can trade tokens without the need for lengthy settlement processes and expensive intermediaries, as blockchain ensures fast and secure transactions.
Through its use of blockchain technology, Finexity is democratizing access to exclusive asset classes and streamlining the investment process for investors.
As regulatory frameworks evolve and blockchain technology develops, we expect to see even greater adoption in the real estate industry, facilitating access to investment opportunities and reshaping the landscape of the market. Learn more about these developments on our dedicated page.
