Tokenization is the basis for digitization and asset traceability in the real estate industry. With RAAY RE we tokenize real estate property and make illiquid assets tradable. Today, our company RAAY RE starts the security token sale of Connex Coin, the first tokenized investment compliant with EU regulations. In essence, Connex Coin represents a loan towards the managing entity of a fully leased, a premium commercial property named Connex, in central Munich: Tokenization And Asset Tradeability For A Digitized Real Estate Industry.
Since the token qualifies as investment token (“Vermögensanlage” in german), it is not tradeable on cryptocurrency exchanges. Token holders receive a fixed interest of 3% and may sell the token back at nominal value.
Traditionally, real estate has been financed by owners, banks, or external investors participating in real estate funds. The investment process in real estate is complex, takes time and effort. By using blockchain technology and cryptocurrencies or tokens, this process can be simplified and made much more efficient.
First, there is the securitization aspect of tokenization:: by making an illiquid real estate asset completely liquid, this type of investment is made accessible for a much larger target group of potential investors. Traditionally, mainly wealthy individuals or companies could invest in real estate. With a liquid asset, such as the Connex Coin, an individual can become a real estate investor starting with a 10 EUR investment.
Besides having a bank account in an EU country and a registration, nothing else is required to buy this investment token. Since Connex Coin is a non-tradable, stable investment token, the token holder receives a 3% interest paid directly to her bank account. Information about the personal holdings is displayed in the personal account. By using tokens, securitization is made easy and efficient.
Tokenization is much more than securitization: a token can be described as programmable money. In other words: tokenization adds programmability to an asset. This way, business logic can be introduced, reducing the need for manual settlements and smart contracts can have functions for automatic transactions, formulas for calculating asset prices, and other specific features at marginal costs. So, what kind of business logic can you add? Simple answer: any. And exactly this large number of degrees of freedom makes it somewhat challenging to start with.
At RAAY RE, we have started by leveraging our proprietary (Crypto) Smart Wallet by adding features that allow token holders making use of specific property-related functions, such as granting access or allowing for the use and payment of facilities. We will elaborate more on this aspect of programmability in the next post. From our perspective, the programmability of formerly static assets provides great opportunities for the real estate industry.
A digital, integer trail of transactions proves a history of ownership and eliminates data misuse and fraud, such as double-spending. Furthermore, the consistent historical record of all transactions allows for realtime, frictionless reporting. Just ask your asset managers and CFOs about their administrative headaches that traditionally could only be healed by tremendous accounting efforts. With a guaranteed complete historic data set of all transactions, this headache can be eliminated completely. Tokenization helps to minimize administrative efforts, timewise, and with regards to costs.
Tokenization And Asset Tradeability For A Digitized Real Estate Industry
For RAAY RE, the tokenization of a share of the Connex building is the first proof of functionality in our tokenization module, which is one part of our Digital Operating System for the real estate industry. There will be more assets tokenized – as well as in terms of securitization, and, specifically regarding the programmability aspect of tokenization: our tokens will come with built-in business logic that will unleash the full value of real estate assets.