With a commercial mortgage, for example, the debt can be recapitalized and replaced with digital securities. They are safer and more reliable than traditional processes used by banks and other mortgage lenders.īlockchain has multiple applications for real estate, from providing liquidity to fractionalization. To make a change on the blockchain, several computer nodes managing the network must simultaneously acknowledge and agree to the change to permanently record it.īlockchain transactions and records are rapidly transitioning into mainstream commerce. Blockchain technology is one of the safest protocols for protecting ownership against fraud or theft. Whenever a digital shareholder decides to sell or transfer their ownership shares to someone else, they will do so through the blockchain, sending the shares to a buyer with a whitelisted (verified) address. An investor never knows when an unusual circumstance will occur and create a need for immediate liquidity. Having the ability to exit an investment before its maturity date is a major benefit and helps to reduce risk. Increased liquidity via tokenization is a win for real estate investors. In reality, this problem of illiquidity was an obstacle that prevented many private investors from entering commercial real estate. Neither the sponsors nor the limited partners had a way to sell their ownership shares to a third party before the planned disposition. Limited partnerships and general partnerships for real estate investments historically have had zero opportunity for liquidity until the asset was refinanced or disposed of. Illiquidity in commercial real estate investments has been a big problem until recently. Their decision to sell all or part of an asset can be an optional tool. Having more liquidity options opens a new world of profit-making strategies.Įarly liquidity means that an owner can sell without needing approval from general partners. This digitized model provides liquidity options for commercial real estate shareholders that did not exist before. Tokenized shares of commercial real estate are placed on a blockchain by the registered owner for trading purposes. Tokenization of Commercial Real Estate – Investor advantage These requirements are put in place by the SEC to protect novice investors from fraud and financial losses.
Before any digital- security transactions can be approved, the issuer must verify that every buyer meets the qualifications. Buyers of digital securities must be classified as accredited investors under Regulation D. digital securities are regulated by the SEC just like stocks and bonds. There is a growing demand for advisory services and financial structuring.Īll U.S. This simply means that existing paper shares have been replaced (in whole or in part) with digital tokens and registered on a blockchain capitalization table.Ĭommercial mortgage professionals will be able to provide many relevant services in this new environment - including sponsor and investor representation, marketing, consulting, transaction specialization, and valuations. Tokenization describes the technical process involved in converting an asset’s analog shares into digitally securitized shares. Tokenization of commercial real estate opens opportunities for greater demand and enhances options for capital markets. Serve the next generation of investors by offering blockchain-based digital mortgages Tokenization of commercial real estate
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