Zug-based BrickMark has tokenized a $135m office building in Zurich. As property tokenization is set to become a megatrend of this decade, announcements like this will soon become normality.
Another Swiss real estate transaction was closed on the blockchain. Real estate firm BrickMark has tokenized and bought a property for $135 million. The building is situated downstreet Bahnhofstrasse, in the center of Zurich.
“We are breaking new ground for the real estate industry,” said Stephan Rind, CEO of BrickMark. “There has never been a token-based real estate transaction of this magnitude. We are implementing what was once no more than a concept in the real estate industry.”
Token owners will benefit from rental income and potential price appreciation
Brickmark purchased the property from RFR Holding GmbH, which retained 20 percent of the tokens as part of the transaction. The company will also keep developing the building complex, which consists of an office building of 1,600 square meters and a Swatch retail outlet on the ground floor.
Dr. Alexander Koblischek, Managing Director of RFR Management GmbH, said, “We gladly accepted the Brickmark tokens as part of the purchase price. We assume that digital financial instruments will also significantly gain in importance in the real estate sector in the future.”
The tokens are based on the Ethereum blockchain and grant their owners a right to receive a part of the rental payments the building generates. Token owners will also benefit from the price appreciation of the building. A bond backs the tokens with the tokens being the equivalent of a bond share.
As a next step, BrickMark will complete a financing round, selling tokens to international investors to raise $56 million to develop the property further. According to its website, the company is currently in due diligence for a “EUR 1bn pipeline of prime commercial property acquisition opportunities in the EU.”
Property tokenization could become a trillion-dollar megatrend
Real estate tokenization is gaining momentum in Europe. In April 2019, Blockimmo closed the first-ever real estate transaction in Switzerland, tokenizing 19 properties with a total token value of 3m CHF.
The FMA Liechtenstein has approved the first real estate token – Crowdlitoken – in April 2019. Crowdlitoken launched an STO aiming to raise CHF 100 million to build up a blockchain-based real estate portfolio.
Also in April 2019, Germany’s financial regulator BaFin has approved the first real estate-backed token of Brickblock. Later in July, Berlin-based Fundament Securities has been given the green light by the regulators to launch the public offering of its €250m blockchain-based real estate bond.
Property tokenization could become a trillion-dollar megatrend over the next years. The advantages are enormous: The global real estate market is worth more than bond and stock markets combined, yet still, it has always been an illiquid asset class.
Tokenization could significantly enhance the liquidity of the asset class by enabling fractional ownership not only of real estate portfolios but also single properties and by simplifying, decentralizing, and automating real estate transactions. Considering the enormous size and illiquidity of global property markets, this is where tokenization could have the greatest impact.