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On December 12th, 2019, Bitbond announced a partnership with KlickOwn to offer real estate-backed bonds tokenized on the Stellar blockchain. The offering, which could kick off as early as January 2020, will be open to retail investors with a minimum investment of €10.
Bitbond and KlickOwn’s Real Estate-backed Security Token Offering Explained
Based in Berlin, Bitbond is an online lending platform that helps small businesses receive loans from both institutional and retail investors. Earlier this year, Bitbond received regulatory approval from Germany’s securities watchdog — BaFin — to issue tokenized bonds. The company went on to raise more than €2.1 million through its very own Security Token Offering (STO).
Now, Bitbond is partnering with property investment platform, KlickOwn. The deal is set to include an STO featuring a real estate-backed digital bond. The asset will be issued on the Stellar blockchain, with the offering expected to kick off in early 2020, possibly in January.
Here’s how it will work: digital bonds will be listed with a corresponding ISIN number. Ownership of the bonds will be represented through security tokens. According to Bitbond, the entire process will be regulated by BaFin and each token will always be linked to the ownership of an asset. In this particular case, the tokens will correspond to bonds which are registered in an actual land registry.
The offering will be open to retail investors. The minimum investment will be just €10. All investors will receive periodic interest payments. Currently, interest rates are expected to fall in the 4% – 7% range, per year. The tokens are likely to have a term of three — ten years. Once the term ends, KlickOwn will pay back the principal.
Based in Hamburg, Germany, KlickOwn has the mission of bringing tokenization to residential real estate throughout the country. The company has plans to conduct additional real estate-backed tokenized offerings as well. In future projects, investors may be able to participate in rental income and value increases in property over time. Users will have access to a real estate portfolio, with assets managed via blockchain technology.
The Benefits of Security Tokens in Bond Issuance
Both Bitbond and KlickOwn anticipate future success when it comes to the integration of real estate investing and blockchain technology. As outlined by Wladimir Huber, KlickOwn CEO,
“…we can do without classic components of a real estate issue such as global certificates or expensive bank deposits. Instead, we rely on transparency and flexibility. Thanks to these enormous cost savings, we are able to offer our investors higher returns. KlickOwn investors invest completely digitally and simply with us. After selecting their dream property, they are not dependent on the performance of a fund manager, as is the case with real estate funds, for example benefit like real property owners. The entire property management, i.e. asset management and property management, takes over KlickOwn.”
Bitbond founder Radoslav Albrecht says they have seen significant interest from a number of players when it comes to tokenizing bonds. According to Albrecht,
“We have significantly enhanced Bitbond following our successful STO and the approval of our securities prospectus for BaFin’s first tokenized bond. We see a tremendous demand from financial service providers and issuers to digitize the bond issue process. With our technology, we enable tokenized proof of ownership of securities, while reducing the number of intermediaries required … We are very pleased to work with such an experienced team of real estate and financial professionals.”
Bonds have seen notable interest when it comes to the integration of blockchain technology. Recently, China announced the issuance of more than $2.8 billion worth of bonds using blockchain. Even the World Bank has issued bonds with the emerging technology — worth $108 million.
Regulated bonds include just one asset-type in which security tokens have seen successful implementation. Throughout jurisdictions across the globe, assets to include equity, real estate, investment funds, and fine art are seeing tokenization — all thanks to the regulated security token.
In differing from the Initial Coin Offering (ICO), STOs acknowledge that they do indeed fall under the regulatory status of a securities offering. In this sense, STOs must oblige by their jurisdiction appropriate laws and regulations. The ICO showed how blockchain technology can be used in capital formation — the STO shows how the technology can do it compliantly.
What do you think about Bitbond partnering with KlickOwn to tokenize real estate-backed bonds on Stellar? What are your thoughts on the tokenization of bonds in general? We’d like to know what you think in the comments section below.
Image courtesy of Planet Ware.