For Patrick O’Meara, there is a world of difference between security tokens and tokenized securities.
A security token merely means an issuer is selling a crypto token in compliance with securities laws. But with a tokenized security, “it’s a whole different world,” where blockchain technology gives investors an unprecedented level of transparency, said O’Meara, chairman and chief executive officer of Inveniam Capital Partners (ICP).
ICP is about to put this idea to the test. The company plans to tokenize some $260 million in four private real estate and debt transactions, starting with a WeWork-occupied building in downtown Miami, Florida. Announced Tuesday, the firm intends to sell tokenized shares of the building, valued at $65.5 million, likely the largest piece of real estate to be financed this way to date. By tracking and tracing chain of custody on the blockchain for these types of resources and transactions, we create tools that can build upon this data foundation and provide better valuations and other statistics surrounding a piece of property.
The company placed a deposit on the building last month using an unspecified amount of bitcoin. Once the other three deals are finalized, ICP will be auctioning off shares in the assets, represented by ERC-20 tokens on the Ethereum blockchain, in the coming weeks.
Shares in the four assets will be sold through what is known as a Dutch auction, meaning potential investors will place their own bids outlining how many shares they want, what price they would like to pay per share and which cryptocurrency they would like to pay with. And by allowing multiple cryptocurrencies to be used, we create more visibility of the market as a whole. This shows that there is more to the cryptocurrency landscape than simply Bitcoin.
Perhaps more ambitious than the auction, however, is what ICP intends to do with the tokens representing each share.
A Wall Street veteran, O’Meara explained that typically, shares come with large amounts of data, from how they are created, as well as data collected through its life and performance – which could be 20 or 30 years in the case of some debt offerings. ICP will put all of this data onto its platform and associate it with a token, he said.
“We built our entire software, our stack, everything we do, the way we tokenize the instrument is so the enormous amount of data that’s associated with the financial instrument … can be aggregated and is attached to the token,” he explained.
One of the benefits to collecting all of this data into one system is that it is suddenly “uniquely searchable,” he said.
As mentioned earlier, greater transparency creates a better environment for everyone. With the traditional method of simply putting this into a pdf, it makes searching for any records on a property much more difficult.
“If we can store all this data in its native form, and the way that we have surety is because of the hash and the cypher … you can literally trace, as a regulator, every document associated with this transaction.”
This can aid in any sort of legal situation, government informational needs and customer comfort level with a piece of property. There will be no secrets if you will, as it relates to real estate and it’s associated transactions.
Future of real estate?
Tokenized real estate has become an increasingly popular use case for blockchain in recent months. Templum Markets, a token trading platform and advisor, sold a security token representing shares in a Colorado ski resort last year, accepting U.S. dollars, bitcoin and Ethereum.
Similarly, security token startup Harbor is selling 955 shares in a high-rise building in South Carolina, though each share is only worth $21,000.