Securitize and RealECoin Help Investors Take Manhattanbr>
RealEcoin is selling New York City. No, not for $24 worth of trinkets. The real estate investment fund is enabling qualified investors to snag pieces of prime locations via Securitize, a tokenization platform which is issuing the RealEcoin, a regulation compliant security token.
The initial RealEcoin will issue security tokens for assets totaling $50 million and offers investors more liquidity than what’s typical in the US real estate market. Investors in RealEcoin have their funds vested in real estate properties – mainly income-producing, multi-family housing units in New York City in need of redevelopment or renovation. The funds are then used to re-equip the housing and it is resold in hopes of a profit, which is then redistributed to shareholders.
RealEcoin was founded by Ruben Azrak, a New York City real estate mogul with a portfolio worth hundreds of millions, entrepreneur, and angel investor. The cryptocurrency was named one of the top-ICOs to watch in 2018 by The Real Deal, a real estate trade.
“We’ve done our due diligence and it’s clear Securitize is the best hybrid platform for the front-end management and back-end issuing of security tokens,” said Azrak. “The flexible platform offers smart contracts and other services that help us move seamlessly through a highly regulated and fast-paced market, to achieve the kind of liquidity that is an advantage in the real estate.”
“Difficult to achieve yet essential to real estate, liquidity is the number one qualifier in most procurements. RealEcoin and security tokens offer investors an alternative to holding their liquid assets in cash – a vulnerable asset,” said Jamie Finn, co-founder and President of Securitize. “From startup incubators to real-estate funds, it’s great to see that a variety of companies are entrusting our platform to structure and manage their security tokenization.”
Azrak and Realecoin managing director and COO Dave Friedman talked to Block Tribune about the project.
BLOCK TRIBUNE: Gentlemen, how will this work? Will it be like a real estate investment trust, where people put money into the fund?
DAVE FRIEDMAN: Okay, to answer the question, this isn’t a real estate investment trust. It’s a limited partnership. It’s an investment fund in which interests in the limited partnership are being sold to accredited investors. And what distinguishes us from a traditional real estate investment fund is that the interests are liquid, or they are going to be liquid. Meaning we are creating a cryptocurrency dubbed the RealECoin, which will be tradeable on regulated cryptocurrency exchanges.
What that means more concretely is if you are an accredited investor and you’re looking for exposure to the US real estate market, specifically New York City’s real estate market, you can buy interest in our limited partnership and then be able to trade them after a one-year lock up period to other accredited investors on one of the regulated cryptocurrency exchanges.
BLOCK TRIBUNE: Why are you doing a one-year lock up?
DAVE FRIEDMAN: US securities laws requires that unregistered securities be held for a one-year period.
BLOCK TRIBUNE: Specific properties that you’re investing in — will the people who invest in it know what those are?
DAVE FRIEDMAN: So the way that it works is that Ruby and his team will take advantage of opportunities in New York City’s real estate market. Investors won’t necessarily be told ahead of time of particular buildings that will be bought, however; the fund is structured such that if there is a liquidation of that meaning that a property is sold, token holders can sell back their tokens to the fund in exchange for a prorated share of profits generated.
BLOCK TRIBUNE: What’s the minimum to get in on this? You were mentioning accredited investors.
DAVE FRIEDMAN: So in order to be qualified as an accredited investor, it varies by country. In the United States, the definition of an accredited investor is either someone who earns at least $200,000 dollars per year or each of the previous two years, and expects to earn the same amount in the current year. Or, if you are married and filing taxes jointly, earning $300,000 dollars per year. Or alternatively, there’s a third criteria, have at least a million dollars in assets, excluding equity in your primary residence.
BLOCK TRIBUNE: When you buy the token, are you also assuming any liabilities for the building?
DAVE FRIEDMAN: Are you assuming liabilities for the building? No. As an investor, you don’t assume liability for the building because you have a minority stake in the fund.
BLOCK TRIBUNE: So what advantage does blockchain afford on this?
DAVE FRIEDMAN: Fundamentally, liquidity. We’re selling the option of liquidity. Again, as I mentioned earlier, one of the constraints with traditional real estate partnerships is that the investments aren’t liquid. You buy into a private fund and your capital is locked up for five to seven years while the fund managers buy the real estate and manage it and generate either profits or dividends for the investors.
And that’s fine for some people, however other people would prefer to be able to buy into an investment fund and then sell their stake after a year or two or three to take advantage of appreciation in the fund.
BLOCK TRIBUNE: What was the origin of this idea to tokenize it?
RUBEN AZRAK: First of all, we thought it was an innovative thing to do at this point in time. With all the cryptocurrencies coming out, and we thought that for us — and really for the public — it’s a way to get involved with the New York City real estate market. And it could be almost as large or as small as you want.
BLOCK TRIBUNE: Okay, the investments that you’re making will only be in New York City?
DAVE FRIEDMAN: Yes.
RUBEN AZRAK: We’re not going to limit ourselves to New York, but probably so.
BLOCK TRIBUNE: Okay. Taking this concept one step further, is there anything else you might be doing that would be tokenized in the future?
RUBEN AZRAK: I can’t go for the future. But right now ,this is our focus, our sole focus.
BLOCK TRIBUNE: Tell me about your relationship with Securitize.
RUBEN AZRAK: Securitize offers a really compelling value proposition. As I’m sure you have heard in the news, there’s a lot of debate around regulations that the SEC has regarding financial securities. And obviously, the opportunity that we’re offering here is fundamentally a financial security. We’re selling interests in a real estate investment fund.
To that extent, Securitize is a really important partner for us because their brand is global regulatory compliance for tokenized assets. The notion here is tokenization of traditional assets, and in order for us to do this correctly, we want to abide by regulations and serve as an example for both the blockchain and the real estate community.
We needed to find a partner that had the same vision as us, that wanted to abide by regulations and adapt best practices. And Securitize was a great partner, so we started working with them.
Read more about this and other ICOs at BlockTribune’s ICO Wiki