More and more, the buzzwords of “tokenization” and “real estate tokenization” are shared in articles and conversations—but that doesn’t mean everyone truly understands what this means and what the process involves.
The list of benefits is extensive, including a more democratized process, access to additional capital for owners and developers, opportunities for newer investors in real estate, greater efficiencies and transparency, and the ability to invest in real estate across the globe. Essentially, digital securities lower the barriers to entry and support the real estate industry as a whole.
The 3 phases of real estate tokenization
Three key phases are required for digitizing a real estate asset, and it all starts with deal structuring:
1. Deal structuring:
Deals can be structured based on asset and shareholder types, regulations, jurisdiction, and other factors. Sometimes, real estate is tokenized to support liquidity and enable the next project in a developer’s queue.
The keys to this first phase are the asset (the property being tokenized), legal structure, which varies but is critical to project launch, investor types, shareholder rights, and regulations for executions, which are often based on the property’s location as well as investors and the amount of capital raised.
Once the deal is structured, it is critical to select the appropriate technology. For instance, it is crucial to determine a physical custody solution for storing real estate tokens, to select the blockchain on which it will be created, to choose a vendor to integrate with in terms of platform and security, and, finally, to elect which marketplace will be used to offer the tokenized securities to investors.
3. Token creation and distribution:
Last but not least, tokens must be created and then distributed to investors. This is managed via a web application established by the selected technology vendor.
Once you launch the asset, you will create – or mint – tokens. Then, you can send tokens to investor accounts or list the real estate asset on your platform; investors will receive tokenized real estate securities following purchase. In this final stage, your investors will also need to get onboarded to your platform.
This streamlined process simplifies matters for property owners and investors, creating transparency and liquidity for all. ABC Tokens is proud to be on the leading edge of this evolution in commercial real estate.