As the tokenization trend reaches new heights, a New York real estate agent and a property developer are using the blockchain to tokenize a multi-million-dollar Manhattan property in order to secure greater and more consistent funding.
The property consists of twelve 1,700 square feet units and is located in the popular Manhattan neighborhood of East Village. Recent appraisals place the value of the property at $30 million, all of which will be funded through tokenizing the property in order to avoid the issues incurred by traditional bank-led financing.
While speaking to Forbes, the real estate agent leading the project, Ryan Serhant, who is also the star of the popular Million Dollar Listing New York television show, explained that this new method of raising funds is highly effective and could be the future of the real-estate industry.
“The market in New York is always strong, but it can take some time to sell for the right price in a new construction building. With blockchain tokenization, we can remove the unruly pressure of traditional bank financing, which is much healthier for the project and all of the stakeholders. Tokenization is paving the way for a new forefront in real estate development,” Serhant said.
Potential Risks of Blockchain Security Token Offerings Averted by Using Regulated Venues
Although it seems like a flawless way of raising capital, there are risks currently surrounding tokenization, including the designation of these token products as securities by regulatory authorities.
Currently, there is a division that exists in tokens, consisting of utility tokens and security tokens. Utility tokens are commonly defined as digital tokens with a specific purpose, like financial transmission, and are compared to security tokens, which typically represent an investment in a project, company, or a centralized authority whose actions directly impact the performance of the related investment product.
Despite the apparent risk involved with property tokenization and the tokens definitions as commodities or securities, the Manhattan project is being done with Propellr and Fluidity, two companies that have created a financial token-based fundraising framework that is fully compliant with US securities regulations.
Todd Lippiatt, CEO of Propellr, discussed the new fundraising model while speaking to Forbes, saying:
“Traditional securities structures and issuance frameworks haven’t evolved in a long time. With blockchain technology, a transparent and trustless ecosystem can start to solve the information asymmetry that hinders the market’s potential for liquidity. This asset, structure, sponsor, and sales team showcase this evolution. With proper discipline and respect, the future is bright for tokenized securities.”
Propellr is a FINRA registered broker dealer, who offers investors a way to store and transact security tokens without risking investment loss due to government regulatory actions.
In order to enable financing rounds for projects like the $30 million Manhattan project, Propellr partnered with Fluidity, who is compliant with US securities act 506(c), which allows them to sell securities directly for fiat currency.
Partnerships like the one between Propellr and Fluidity are a critical component in bringing blockchain-based funding alternatives, like tokenization, to all markets, including real estate and traditional corporate financing.
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