Real Estate Asset Tokenization

Goals

To provide examples of real estate assets that are utilizing blockchain to sell partial ownership of assets or to assist with the operating or sales process (focused on partial ownership). Explain how the "tokenization" was set up, how it works, what issues arose, and any best practices that have generated positive outcomes.

Early Findings

Mata Capital

  • Mata Capital is a French real estate fund management company. In 2019, it started leveraging blockchain technology to "modernize and optimize the processes of distributing fund shares and maintaining its investor registry."

Tokenization at Mata Capital

  • Mata Capital is using asset tokenization to allow increased participation in real estate investment by reducing the "costs associated with investor registration, investor onboarding, and subscription operation."
  • Mata Capital aims to lower the minimum investor subscription amounts from €100,000 to €1. The reduced costs as well as increased digital functionality of blockchain will, in turn, help the company attract a larger and more diverse pool of real estate asset investors.

Tokenization Set Up

  • The company has entered into a partnership with ConsenSys Codefi to issue security tokens for three funds worth €350 million combined.
  • Its first tokenization project involves the ownership of a planned 11-story hotel in Paris. The issuance of €26 million for this project makes it one of the largest real estate tokenization projects in Europe.

Pain Points and Solutions

  • Some of the pain points real estate asset management companies including Mata Capital face include: Difficult and costly fund creation, asset distribution, and registry maintenance process; high minimum investment subscription amounts resulting from huge administration costs; and limited access of investors to secondary markets making it difficult for them to trade assets.
  • Mata Capital manages its investor registry through paperwork, making the process costly and less accurate. Digitizing this process would help the company overcome this challenge.
  • The company leveraged ConsenSys Codefi Assets’s "Ethereum-based platform that uses smart contracts to describe the real estate asset, define its compliance requirements, validate the investor Know-Your-Customer (KYC) profile, and issue corresponding fund shares to each verified investor. "
  • This reduced Mata Capital's workload involved in researching each investors’ eligibility and risk profiles. Instead, potential investors were invited to "create accounts, fill in a KYC compliance form and upload all required documents to the platform. These documents were then processed off the Ethereum chain by Mata Capital." Eligible investors were then identified and whitelisted.
  • The precision and automation capabilities of Ethereum enabled eligible investors to specify the "nature and number of shares they would purchase, make the payment via wire transfer and receive the shares upon payment validation. Behind the scenes, this involved the issuer authorizing the transfer of tokens to whitelisted investors through a certificate signed using its private key."

Summary of Findings

  • In the initial research, we have found and briefly summarized one case study of real estate asset tokenization.
  • Initial research shows that while there are a number of blockchain startups and companies/real estate companies that are integrating blockchain technology with real estate assets, examples of tokenization to sell partial ownership of assets were not immediately available. The tokenization examples available mostly focus on real estate transactions, reducing fees and costs, digitizing and speeding up processes, and provide liquidity options.
  • Since no geographic focus was provided, we have assumed a global focus for this research.

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