Germany has just seen the first real estate tokenization. Last month, a Swiss startup conducted a similar transaction in Switzerland. Europe is experiencing the early stages of a trillion-dollar industry.
Brickblock, a Germany-based blockchain startup, has closed the first ever blockchain-based real estate transaction in Germany. The announcement comes just one month after the first STO in Germany, Bitbond, was approved by the German financial markets authority Bafin.
Brickblock CEO Jakob Drzazga says, “Blockchain […] has the potential to create a more efficient and globalized financial system.”
EUR 2m tokenized and sold to qualified investors
The total property value is EUR 2m, and the tokens were issued exclusively to qualified investors. The property is a residential property located in the city of Wiesbaden. Axel von Goldbeck, Partner at the Law firm DWF Germany, says, “The Wiesbaden transaction is further evidence of the great flexibility of tokenization and its potential to make illiquid assets liquid.”
Brickblock has tokenized an SPV share participation, meaning investors will be entitled to the economic benefits of the underlying real estate asset, such as dividends from rent, interest, and principal distributions.
The company operates as a B2B Funds-as-a-Service technology platform, offering solutions including know-your-customer (KYC), investor clearance, data room organization, reporting, auditing, and compliance, as well as automated clearing registries and payouts. Brickblock secured venture capital funding by Finch Capital in May last year and has offices in Berlin, London, and Gibraltar.
Just the beginning; further projects already in the making
Looking across the pond, the US firm Factora tokenized a property in central New York in February. Already last year, a property project worth US$ 30m was tokenized in Manhattan.
While Brickblock has tokenized the first real estate asset in Germany and the European Union, the award for the first blockchain-based real estate deal in Europe goes to Switzerland-based firm blockimmo. Just last month, the company has organized the first blockchain-based real estate transaction in Switzerland, in the city of Zug.
Both blockimmo and brickblock have announced further projects. Blockimmo will tokenize more properties and sell the tokens in a public crowdsale. Likewise, brickblock is already eyeing its next project: The German real estate investor Peakside Capital will use Brickblock’s platform to set up a digital real estate fund in Germany.
Tokenizing real estate will become a trillion-dollar megatrend
Tokenizing real estate assets has enormous advantages: It’s a way to bring liquidity into an asset class that has traditionally been extremely illiquid. While it’s possible to invest in fractional ownership of real estate portfolios, for example by investing in Real Estate Investment Trusts (REITs), it has so far not been possible to buy shares of single properties on the open market. Blockchain technology will make this possible.
“Once a property, real estate fund, or financial instrument is tokenized, the real advantages come into play: subsequent transactions are instant, nearly free of charge, and, if done properly, without counterparty risk. This is an absolute game-changer for the industry,” says Drzazga.
We’re experiencing the beginning of a megatrend. Large institutional investors are already in the starting gates. In February, the financial group Elevated Returns announced it has selected Tezos as the blockchain to tokenize its real estate portfolio. “We have a number of very high-profile deals lined up,” said Stephane de Baets, President of Elevated Returns.
Elevated Returns has access to a pipeline of more than US$ 1 billion of real assets. Once startups like blockimmo and brickblock have proven the economic, technological, and regulatory feasibility of tokenizing real estate, it won’t take long until the big players follow.