On January 21st, 2020, real estate tokenization platform REINNO announced the successful tokenization of a real estate fund worth $105 million. The fund — REI Capital Growth — will be available to investors through a security token offering, where tokens are backed by “cash-flowing” commercial real estate in the United States.
The REICG Security Token Explained
REI Capital Growth (REICG) is a real estate fund operated by REI. The fund is valued at $105 million, and is backed by commercial real estate situated in the United States (US).
Now, the fund has been tokenized by REINNO, a real estate tokenization platform. Through a Security Token Offering (STO), the fund will be offered to international investors.
The offering aims to raise funds through REICG security tokens, which are backed by tangible, “cash-flowing” commercial real estate throughout the US, says REINNO. The company added that REICGO security tokens are fully compliant with both SEC regulations and KYC / AML directives.
The token is said to bring a new model of investing to the real estate sector. The REICGO fund will include two tiers: $40 million worth of equity and $65 million worth of debt. Security tokens will able to see secondary market liquidity after a mandatory holding period of 40 days for debt and one year for equity.
All companies involved believe tokenization brings significant benefits to the real estate sector. Alan Blair, managing principal of REI, says,
“I have been in the real estate business for over 36 years. It is exciting to see the industry evolve and use innovative technologies, such as blockchain, to create new opportunities. Tokenization allows us to reach international investors and offer them exceptional investment opportunities in American commercial real estate. We are now able to deliver flexible, paperless assets and the highest standards of excellence to investors worldwide.”
How Does Tokenization Help with Real Estate Investing?
While real estate is often regarded as an attractive long-term investment due to its stability, there is one major drawback: a lack of liquidity. Real estate — especially commercial real estate — is typically very high in value, requiring an extensive amount of time, money, and other resources to execute a transaction.
That’s where tokenization comes into play. A real estate developer looking to raise private capital quickly and without the typical liquidity premiums can turn to tokenization.
REINNO’s platform also offers loans backed by tokenized real estate. Security token holders can decide on the size of loan collateral, transfer the tokens to a specific wallet, and receive funds “almost instantly”. Once the loan is paid back, investors will regain the equity equivalent of the principal they paid against the loan.
According to REINNO CEO Viktor Viktorov,
“Tokenizing REI Capital Growth brings us one step closer to creating an ecosystem where commercial properties are liquid while real estate transactions are paperless, instant and efficient. We already provide real estate tokenization and lending services; soon we are launching a new functionality which makes investing in tokenized real estate easily accessible.”
Barry Monies, REINNO’s chief business development officer added,
“Tokenization is revolutionizing the industry and establishing a new model for owning, financing and investing in real estate. We are taking the biggest asset class online. I have been involved in commercial real estate investing for 30 years and this might be the most exciting development I have seen in this industry so far”.
A number of other real estate deals have been recently announced in the security token industry. The River Plaza, a luxury residential development located in the UK, is set to be tokenized via tZERO and the Tezos blockchain. In the US, a 216-unit luxury condominium located in Brooklyn will be tokenized in a deal involving UPRETS.
What do you think about the REI Capital Growth real estate fund undergoing tokenization? Will the all-too-common illiquidity seen in real estate eventually result in tokenization as a commonality? We want to know what you think in the comments section below.
Image courtesy of Finance Unknown.