There’s nothing like investing in commercial real estate. So many dream of owning large office buildings, medical complexes, retail sites, high rise mixed use projects, and multifamily properties. The problem is that most of these people don’t have the resources to take down any of these projects on their own, as many project developments run into the hundreds of millions of dollars.
So how can investors still take part in these deals? The answer is through real estate syndication. With a top-level view of a syndicate, the real estate “sponsor” finds the property, sets up all the offering documents, then searches for investors to form a crowdfunding type of investment. Sounds pretty cool, right? Well, it is.
There’s only one problem: with a syndicated project, there’s really no way to sell your ownership should you need to until the entire project is sold by the sponsor and everyone receives their cut of profits at that time. Ah, the liquidity issue at work again!
The truth of the matter is that life happens – and sometimes you’ll need money at unanticipated times. And sometimes, substantial money. When your investment is tied up in a real estate syndication project, good luck getting it out. Your only option is to find someone on your own to buy your investment from you (if the syndicate allows) or hope someone creates a secondary market for your real estate asset. Good luck in finding that too, at least in today’s market.
But there is good news: enter tokenization into the process! Tokenization is the “tokenizing” of real assets, and has tremendous applications in the real estate industry. When real estate sponsors, developers, and syndicators tokenize their offerings, they allow investors to purchase a percentage ownership in their deal – similar to shares in a company – only with access to a secondary market to allow for liquidity within that transaction! And because it is based on blockchain technology, the entire transaction is safe, secure, and (most importantly) immutable. The deal becomes known as a “Security Token Offering”. Note the term “security” – that means the Security Exchange Commissions considers the product a security and as such issuers have to go through strict guidelines to even be able to offer their deal to investors in the first place.
In other words, it’s not a “fly by night” process. Tokenization when done correctly allows for the secure onboarding of investors via required “Know Your Customer” and “Anti-Money Laundering” (KYC/AML) software, the creation of digital “Tokens” with “smart contract” capability on the blockchain, along with seamless transfer agent custody (meaning account statements are provided to the investor with updates on their account status, account activity, and current value), and of course, the ability to trade (buy/sell) that token asset on a secondary market.
Before blockchain and tokenization, if you invested $100,000 into a multifamily mixed use syndication project as an example, then all of a sudden you have a family emergency and need that money urgently, there wasn’t much you could do. When an investment is tokenized, you just log into your account and place an order to sell and you’re out. It’s that simple! (and powerful)!
There’s nothing wrong with investing into a syndicated real estate project that a project sponsor offers. In fact, many of these deals return amazing investment results – and there are many online portals that list these opportunities for purchase. But if liquidity is your concern, you should definitely look into tokenized investments. And if you’re involved in any kind of real estate developing or syndication – including real estate sponsors and owners of commercial real estate property – you should DEFINITELY be looking into the option of tokenizing your real estate investment.
The World Token Market makes it all happen for you. Contact the Market today!