Even though the fractional ownership of a real estate asset significantly increases the investors pool but there are some requirements for accredited investors in the US. One of the entry requirements for investment is $500,000. This requirement is rightly criticized by many since it significantly decreases possible investors and the concept of fractional ownership by masses cannot be made possible.
BlockPublisher talked to Vertalo’s founder and CEO Dave Hendricks and he also talked about this issue which greatly reduces the investors pool. He said:
Security token offerings have some typical requirements for accredited investors in the U.S. The entry requirement for the investment is $500,000. The rules are that certain private assets can only be sold to certain type of investors and some people are not happy about it.
In what may turn out to be a revolutionary deal, Vertalo is all set to tokenize four real estate properties worth $260 million in U.S. This first-of-its kind and the largest asset tokenization deal till date is being heralded by Vertalo, Invenium Capital Partners and Securrency who have partnered to pave way for the capital markets of small-to-medium-sized enterprises.
Tokenizing assets helps solve the highly illiquid nature of real estate through fractional ownership. By forming a local network belonging to the asset, tokens are made within the network and every token has a value. Hendricks discussed how Vertalo is helping in one of the largest tokenization deal of real estate. He said his company is helping with KYC (know your customer) process and AML (anti money laundering) law, the two requirements to ensure transparency of a system. He said:
Vertalo is helping Invenium with investor on-boarding. We are integrating KYC and AML for each offering. We are also helping with system integration and project management.
Vertalo is a compliance and liquidity enabling platform to make digital asset management solutions. The platform helps issuers and custody platforms to bring assets on board through security token offering, a process where tokenized assets are distributed among investors. The company also helps investors manage their tokens over blockchain while applying KYC and AML. Vertalo partners with experts of traditional financial sectors and applies it over the digital currency ecosystem.
Tokenizing assets solves real estate investor’s biggest dilemma of asset liquidation. As soon as tokens of any particular asset become available, they can be traded easily on the secondary market and the whole process of going to wealth managers or banks is cut off. Hendricks addressed the issue of asset liquidation that all investors face in traditional real estate industry. He said:
“The real challenge for tokenization is it needs to have a strong offering for the investors. What investors are interested in is a good return and asset liquidity that are achieved by tokenized offering. If anyone wants to move their money somewhere else or liquidate it, it’s easy to move and exit and that is why tokenization is interesting”.
Apart from easy liquidation, tokenizing an asset is also cost efficient. It immensely reduces the cost incurred in administering and managing an asset. Traditional real estate deals are done behind closed doors and require complex paperwork in the form of legal issues or bank transactions. High fees of lawyers, real estate brokers and bank transactions make it very costly to buy or sell assets. Hendricks thinks:
STOs are very cost efficient, they decentralize ownership that reduces the cost administering the ownership of the asset. If STOs are done correctly, they are already in compliance with securities law.
Security tokens enable secondary liquidity for private assets and this is a big deal. Traditionally, it is hard to sell private assets because there are not many buyers who would match the price tag, it involves complex paperwork and it is time consuming. Vertalo is paving way for asset tokenization that will eventually revolutionize the real estate industry but half a million dollar entry requirement is clouding the largest real estate tokenization deal.