German regulators approved Fundament Group’s Security Token Offering. The firm launched a real estate-backed token for institutional and retail investors, opening up the German real estate market to global buyers.
The German financial markets authority Bafin approved a real estate-backed token for the first time in history. Berlin-based Fundament Group has been given the green light by the German regulators to launch the public offering of its €250m blockchain-based real estate bond.
A Bafin spokesperson told CoinDesk, “We can confirm that we granted approval for a Fundament Group prospectus. It has indeed been the first time we have approved a prospectus regarding blockchain-based real estate bonds, but not the first time in respect to blockchain technology as such.”
Getting approval was a lengthy process. Fundament Group had spent almost a year and a half preparing. Fundament co-founder Florian Glatz, commented, “The reason we went through this long and tedious process with regulators was to get rid of any restriction.”
“Normally, these projects are limited either by the minimum investment amount, which would be north of €100,000 or limited heavily in the number of investors you could have. So it’s the first really mass-market tokenized real estate for the world,” he added.
Diversified real estate portfolio with 4-8% expected IRR p.a.
Fundament’s token is based on the Etherum blockchain and replicates a diversified basket of real estate development projects in Germany. It includes projects in different industries, such as hotels, daycare facilities, and student accommodation. The prospectus allows both institutional and retail investors to participate in what the company calls a “true public offering.”
Thomas Ermel, a German-based asset manager with a successful track record in the industry, manages the portfolio. Florian Glatz says, “The underlying asset is a solid portfolio of German commercial real estate that is very value-stable and growing for over twenty years, year-over-year.”
According to Fundament Group, investors can expect returns from 4% to 8% IRR per year. Dividends are based on the portfolio’s performance and can either be paid out annually or reinvested into the portfolio.
The bond will mature in 2033 when the investors receive their principal repayment. After the primary issuance, Fundament will list the token on digital exchanges enabling investors to sell it in secondary markets.
Real estate the most promising blockchain use case
Fundament Group was founded in 2018 and offers a “one-stop-shop” for asset tokenization. The STO is just the first step and real estate is only one field of application.
In the future, the Fundament hopes to attract other asset managers interested in launching an STO and the company wants to add further asset classes, such as venture capital, private equity, or renewable energy. “We want to offer this service to many more clients with a variety of different asset classes,” said Glatz.
Real estate is undoubtedly one of the most promising sectors for asset tokenization. The first property was tokenized in Germany earlier this year and last month Germany-based Peakside Capital announced to launch a $225 million real estate fund in cooperation with Brickblock’s blockchain-powered Fonds-as-a-Service platform ScalingFunds.
In Liechtenstein, the FMA approved Crowdlitoken in April, which also sells a blockchain-based real estate investment portfolio. In Switzerland, blockimmo closed Europe’s first blockchain-based real estate transaction in March and announced many more to come.
The industry has long suffered from a lack of liquidity and sky-high transaction costs. That’s precisely what blockchain can change. If any industry is ripe for a major blockchain disruption, it’s real estate investing.