The Tokenized Revolution In Real Estate Summit

The Tokenized Revolution In Real Estate Summit Esper Wealth has game-changing PropTech to lead the way in the digitalization of real estate

Key considerations regarding real estate tokenizationI. Securities law implicationsGenerally, the tokenization of real e...
02/11/2022

Key considerations regarding real estate tokenization

I. Securities law implications
Generally, the tokenization of real estate will be considered a security but an analysis on each specific token should be considered at the outset. If the token is a security, the issuance of such a token will be subject to the applicable prospectus requirements or reliance on an exemption, such as the “accredited investor” exemption.

In addition to the prospectus requirements, the issuer must consider the applicable registration requirements.

II. Reconciliation with the land registries
Real estate tokenization requires reconciling the applicable transaction with the current systems of land registration.

As each jurisdiction in Canada has its own land registration system, an issuer of a real estate token will be required to reconcile the transaction with the land registration systems of the jurisdictions where the underlying real estate is located.

Benefits of real estate tokenizationI. Lower barrier to entryBy facilitating investment in fractional portions of real p...
02/11/2022

Benefits of real estate tokenization

I. Lower barrier to entry
By facilitating investment in fractional portions of real property, real estate tokenization enables small-scale investor participation and lowers barriers to entry for retail investors. Lower minimums and smaller investment amounts can thus be leveraged to benefit from the potential high returns available to traditional real estate investments – which typically require significantly more upfront capital.

II. Ability to create liquidity
Real estate tokens are easily and securely transferable by way of blockchain technology, allowing investors to diversify their portfolios, minimize risk and create liquidity in the real estate market. Conversely, issuers are provided access to a wider pool of investors.

III. Lower transactional costs
Through automated processes and a permanent unchangeable digital ledger, blockchain technology has the potential to streamline investment transactions and lower transaction costs. As a result, investment transactions are generally completed faster and at a lower cost to the parties involved, facilitating higher returns for the investor. Tokenization also provides a host of other benefits, such as real time capitalization table tracking, improved accessibility and greater transparency for potential investors.

How does real estate tokenization work?Real estate tokenization is the process of fractionalizing real property into tok...
02/11/2022

How does real estate tokenization work?

Real estate tokenization is the process of fractionalizing real property into tokens stored on a decentralized database. This decentralized database stores information like a digital ledger and is commonly referred to as blockchain. The distributed ledgers on which real estate tokens are captured are validated by the blockchain network, synchronized and shared with all network participants almost instantaneously, permanently recording an accurate ledger of transactions generally accessible to the public.

Real estate tokens are similar to non-fungible tokens (NFTs), which are non-interchangeable units of data stored on a blockchain that can be sold and traded, with the exception that real estate tokens are generally tied to the value of a physical asset. A real estate token can represent, among other things:

Ownership of part of a real property
Ownership of the entire real property
An equity interest in an entity that controls real property
An interest in a debt secured by real property, or
A right to share in the profits generated by real property
Real estate tokens can also be differentiated from real estate investment trusts (REITs) since they allow for a specific investment linked to a particular real property, whereas REITs typically facilitate investment into pools of various real estate assets.

The digital tokens are created and issued on a blockchain during a security token offering (STO), also referred to as a tokenized security offering or a tokenized asset offering. Each fraction of ownership is converted into a token and then encrypted to grant ownership. Ownership can then be transferred directly from investor to investor on digital securities marketplaces using alternative trading systems (ATSs) almost instantly for a relatively low fee.

02/11/2022

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