In this video we are going to discuss what tokenization means in the context of real estate and how it can bring value to all parties in the transaction.
Transcripts:
Mohsin Masud 5:35
Now, when you get into security tokens and tokenization of real estate, that is a very real thing that is happening today. That’s exactly and-
Chris Bounds 06:04
that I think, really is the biggest impact. Absolutely, especially in the near term, because it adds that extra liquidity value the private equity has not had. Now that when you and I think it’s going to get to the point where you’re actually going to have investors, highly preferring or maybe discounting non tokenized securities, just for that lack of up.
Mohsin Masud 06:29
Yeah, it’s not even discounting not non tokenized securities. What really happens is when a real estate asset is valued on the appraisal, a larger commercial real estate asset, the biggest factor affecting the value of it is the discount, or marketability, because it’s not an easily tradable asset. Right, just like a capital markets product or a Tesla stock or Facebook stock or something along those lines. When you move this non tradable asset to a semi public market, that discount or marketability reduces, which means there’s a premium that gets added on or as we add, accrue, like to call it, the liquidity premium gets added on, the true value of the asset gets unlocked.
I know we’ve talked about this last time as well. This kind of goes into cap rate compression, where smaller investors are willing to take slightly smaller returns, because they’re getting access to this asset class. But that unlocks at that real value. That’s exactly what’s going to happen, oh, what you said that people would really want to get the true value of the asset and therefore they want to go for tokenized assets versus the non tokenized assets, as well as they want to liquidity. Who doesn’t want liquidity who wants to wait for 45 days before they sell their house or six months or a year before this other commercial building. That’s a tough stop spot to be.
Chris Bounds 07:39
Anything like that cap rate compression, that’s a restricted time window. It’s a limited time window, meaning once it happens and we’re already in, that’s the new normal. Then that goes away, just because you’re all under the same, you’re all under the same rules now. But that transition potentially puts really good operators that they do their job and have good assets and good properties. They stand to win the benefit of of being first, but they may have some front end costs. They are going to be paying for it on the front end. But they may actually get a good windfall.
Mohsin Masud 08:14
Yeah, the front end cost is so fractional. What is really important is that they pick the right product for making these changes, right. We were at a conference last week, where there are plenty of tokenization companies out there who are working not just in real estate, but also a whole bunch of other private market assets, all good companies. The problem with real estate is real estate has very specific needs. You can’t go to I don’t know,
I’m not going to go to take a name of any company, but you can go to an XYZ tokenization company and then go to an ATS and then expect that, oh, this is going to provide us the best optimum solution, and then go to maybe at folio or Juniper square or something for your investment management and your reporting and your financial like, that’s not really solving the problem, you’re creating more problems by doing something like that.
And that’s why we created a crew, right, we wanted to kind of have a white glove solution where we provided A to Z solution, it’s from initial due diligence, tokenization initial offering, secondary market, investor management, asset management, distributions, reporting, the whole nine yards all in one simple solution, and that’s why it’s very important for asset owners and operators to pick the right solutions, something that will truly remove the hurdles and not bring in more more problems and more transaction.
Chris Bounds 09:37
Now, but, you know, as we get along, we’re gonna have that, those those bridges and all that, whether it’s in the same platform or we’ll have the Zapier type programs that can bridge between one one app to another, mostly.
Mohsin Masud 09:56
Yeah, no like we use them for credentialing all the data that’s behind every asset on our platform, right? We invent him every asset as started off with it. There’s already those things being built in, like we have API calls into at folio yardie, rent manager for getting the real time data onto the group platform if you don’t want to move from your existing platform or to the accrued platform. Those bridges are being built, but someone needs to build it for the industry, right?
People really need to understand the difference between what happens when you NFT and asset like, property does. Or what happens when you tokenize an asset, which is the case for investment assets, right? Property enables real time peer to peer transactions, you’d never have to go back to a title company to do it, you could just by Southern traded as and when you wish to do so your NFT represents the ownership within the LLC. There, there may or may not be any form of debt on that property. I’m not sure what properties model on that is. But you know, all of those things kind of come into play on that.
Chris Bounds 10:58
Love it. Love it. Well appreciate it. You’ve been a wealth of information here and I look forward to talking to you soon. We are going to be tokenized in our next fun so I’m sure we’ll talk again soon.
Mohsin Masud 11:12
I’m excited about that. Look forward to working with you check out accrued ACO aka r u.cl. And thanks so much for having me, Chris. Absolutely. Take care.