As of November 27th 2018, Harbor has teamed up with Convexity Properties to tokenize the ownership of a luxury property located in South Carolina. The offering, available to US-based accredited investors, aims to raise $20 million through the revolutionary benefits offered through tokenization.
Real-world implementation of blockchain technology has struck once again in the security token sector.
US investors can now own a piece of ‘The Hub’, a luxury student residence located in South Carolina, through the form of a token.
The Hub— pictured above— is owned by Convexity Properties. They’ve worked with Harbor to successfully launch the tokenization of the property’s ownership. The deal has made history as the first tokenized REIT in the US.
Details of The Hub’s Tokenization Explained
The offering aims to raise a total of $20 million by selling 955 shares, with one share per token, at a price of $21k per token.
Don Wilson, CEO of Convexity Properties, said the tokens will be entitled to a 5% dividend. The tokens will eventually be available for trade through compliant security token exchanges.
Harbor is the tokenization team behind the first of its kind offering. Harbor’s R-Token is an ERC-20 compatible security token standard which is used for commercial real estate and investment funds.
Josh Stein is Harbor’s CEO. He says tokenization offers a superior process when compared to traditional financial security methods. The blockchain cuts out middlemen and features much lower transaction fees.
The revolutionary technology provides added liquidity since exchanges operate 24 hours a day, seven days a week, 365 days a year. Such operating conditions differ drastically from the conventional platforms where securities are traded: stock exchanges. The New York Stock Exchange (NYSE), for example, operates Monday – Friday, 9:30am – 4:00pm, excluding nine holidays throughout the year.
In addition, fractionalized ownership— as seen through The Hub’s tokenization— increases a company’s pool of available investors, while allowing the company to maintain private status.
For example, an offering such as Convexity’s might typically be sold to 10 or 15 investors. But with Harbor’s platform, the deal is opened up to a maximum of 2,000 investors who can participate in the offering. Anything larger than 2,000 investors would require the company to go public.
All-in-all, Stein says the tokenization of securities demonstrates an inevitable development of technology:
“Think of it like the transition from snail mail to email that occurred in offices in the 1990s. The content was the same but the digital format made it faster, cheaper, and easier to send.”
How Security Tokens are Already Witnessing Real-World Implementation
The luxury property in South Carolina is not the sole instance of the blockchain’s newest revolution.
Tokenization has reached luxury real estate in both Colorado and Manhattan, investment funds, equity, even the ownership of a Picasso painting. In fact, Josh Stein has previously stated that professional sports teams have expressed interest in tokenizing ownership.
Recent SEC activity has seemingly moved beyond fraud by targeting securities violations. EtherDelta’s founder was charged with operating an unregistered securities exchange. The SEC recently imposed its first-ever penalties for ICO securities registration violations.
The activity has pushed some companies to cancel ICOs and turn to Security Token Offerings (STOs) out of regulatory worry. The reasoning is straightforward: security tokens have no fear when it comes to regulatory requirements.
As Stein has explained, security tokens involve the tokenization of a pre-existing financial security. This security was subject to securities laws and regulations long before blockchain technology came along. If those existing securities laws can be transparently and algorithmically enforced through programmable smart contracts, security tokens have nothing to fear when it comes to legislation.
The situation has resulted in some to predict the security token industry to surpass the entire cryptocurrency market cap— with Bitcoin included.
Whether or not such a forecast will become a reality, is yet to be seen.
What do you think about the tokenization of ‘The Hub’ in South Carolina? What does this say about the evolution of the security token industry? We want to know what you think in the comments below.
Image courtesy of Fortune.