How Blockchain Technology is Revolutionizing Real Estate

By: Elijah Levine

Whether you believe in the actual technology or have just heard about it through the general hype (or one of our below articles), it appears that blockchains and cryptocurrencies have now touched pretty much everybody’s life in one way or another.

Of course, everybody’s involvement is not the same. Some people might have downloaded an app on their iPhone to purchase some $BTC or $ETH (or even just to observe them), while others are deep in Solidity, Ethereum’s native coding language, building smart contracts to decide outcomes, infrastructure, fundraising, and governance, and more on numerous projects around the world.

What is a smart contract? Glad you asked, smart contracts are electronic contracts written in code that decide outcomes algebraically based on inputs, proof of information, or other required actions.

Many of the new layer-1s, such as $ICP and $ROSE, have easier to use and even more scalable smart contract capabilities than $ETH.

The possibilities of this technology are truly limitless as it is so applicable across industries. From government to real estate, music to gaming, auditing, healthcare, and more, the world is in need for major technological upgrades.

For centuries, we have observed business infrastructure and the legal system fail thousands of people around the world, data be mismanaged, and blatant fraud occur at all levels of private and public sectors alike.

Modern technology like blockchains and smart contracts are slowly but surely changing all of this, and a couple key players are leading the way.

In this article we will focus on those leading in the world of real estate. 

To begin, I want to introduce the concept of a Decentralized Autonomous Organization (or “DAO”), which is one of the rare environments in which true decentralization, and therefore true democracy, can occur (if set up properly).

A DAO is basically an LLC that is governed via smart contracts and verified on the blockchain. Proper DAOs are registered with the state they incorporated in (only Vermont and Wyoming legalized DAOs thus far). A perfectly decentralized DAO would have a myriad of members and every member would have one vote.

Modern decentralized frameworks like DAOs have made the securitization of assets even more popular. At first, this securitization happened almost exclusively in the form of tokens (and many still do), but now more and more creators are looking towards even better solutions like DAOs, Non-Fungible Tokens (or “NFTs”), and other decentralized frameworks to securitize various assets.

It sounds complicated but it’s not. Most people don’t understand how many “NFTs” already exist out there and how many are used daily.

Some familiar examples (both physical and digital) are receipts, tickets, watches, TVs, food, basically anything that is uniquely identifiable (think serial numbers) and could in theory be traded. Of course, you would never make an NFT for food unless you planned on never eating it, because as soon as you ate it, it would cease to exist – although this could be thought of as a burn function in NFT lingo – just like you would never (or at least rarely) trade your food.

On the other end of that spectrum, your data that big tech companies are tracking and storing are also NFTs. Each data log of what specific websites you clicked at what specific times, or any and every other action you’ve ever taken online, is unique to you and immutably stored in one of Facebook, Google, and / or Apple’s data centers. 

I believe that Web3 will not only bring the importance of data ownership to the attention of everyday people, but also allow those people to understand and participate in it. A growing amount of people are already starting to use NFTs, DAOs, and other modern decentralized frameworks in evermore creative ways.

Take Balcony DAO, for example, a group working to tokenize shares in investment properties through NFTs.

Not only does each person’s individual NFT represent their share of ownership in that given property, but they are working to build out the ability to deliver “data rooms” to investors via specific, KYC-ed NFTs.

The main benefit of this would be that those on both sides of the equation (the data viewer and the data provider) are certain of each other’s identity, but it would also create a more streamlined, secure, and organized way to view, compare, and continuously reference important diligence material.

Tokenizing real assets (and even fractionalized ownership of them) is not necessarily something that new, but delivering immutable, KYC-ed information through that tokenized asset (or even alongside it) is extremely novel, interesting, and promising for the space. 

Even large institutional groups, like KKR, have been securitizing funds through tokens, but securitizing assets, even with tokens, still falls in the pretty traditional finance world- even though it is very cool and exciting to see more large institutions using blockchain technologies to do this.

More intangibly, we’ve observed “Metaverse” companies of all shapes and sizes pop up during the last few years, especially with the continued popularity of blockchains and online media.

That said, not many groups have done it all that well. The Sandbox might have reached mass consciousness and attracted major celebrities, but their platform looks like a crappy, half-developed game from 2010 or earlier.

These stylized facts become apparent in the data.

As of October 10th, 2022, The Sandbox had 616 Daily Active Users (DAUs) and Decentraland, another Metaverse product that was massively popular during the last few years, had just 23.

Blockcities, on the other hand, has developed infrastructure for the real world while leveraging the “Metaverse” in the process.

Designed to be a bridge between digital and physical worlds, Blockcities has created a digital twin of the earth to visualize and synchronize future upgrades in the real world. They did this by overlaying the entire world with high resolution Google Map images broken out into hexagonal land parcels that investors can purchase to own “land” in the Blockcities Metaverse. 

All functionality is facilitated through smart contracts, with the ability to be exported as widgets that can show up in other systems. In the future, this will look like pins tied to real world locations, each pin with unique utility.

The plan is for all current functions of cities to occur in a much more efficient, transparent, and technology-enabled way. This includes everything from voting to bidding on open community projects, analyzing properties available for rent and purchase to owning shares of real world assets, and more.

While these functions may appear in a “Metaverse” setting, Blockcities has been built to integrate the physical world into functionality and application as much as possible. 

At this point, it’s very important to understand that each of these tech platforms is and should be considered its own “Metaverse,” and that the word “Metaverse” really just describes any digital platform that allows users to interact simultaneously in the same place – even Instagram and Snapchat are examples of Metaverses in the truest sense of the word – although digital twins and AR / VR have pushed us towards accepting more of this new tech as the modern “Metaverse.”

Blockcities is doing a lot differently than many other Metaverses that I find particularly interesting. The first thing is that it’s structured as a DAO based on land ownership, which is very rare for Metaverse projects.

While many other projects have focused on community, Blockcities has focused on community but also utility for investors, starting specifically with governance. They are working to partner with local governments for the governance of Blockcities-owned parcels to be settled on-chain.

Establishing strong or at least some sort of communication between local government and highly modernized technology will happen eventually. The sooner that work starts, the higher chance of success, alignment, and progress on things we care about.

There are big problems facing us all, but tech can help us solve them.

Blockcities also encourages real ownership alongside digital ownership and has plans to deliver additional tangible benefits other than governance and community to landowners over time. Like many other Metaverses, there is a fee share for others doing things on (or sometimes even just visiting) your land in the virtual world.

Outside of the virtual world, Utah-based startup Estate Chain is one of many groups helping settle physical real estate transactions in crypto. However, Estate Chain and most of the other companies mentioned so far in this article are relatively new and / or startup companies. There are large groups in the space that have tried and true technology as shown by their transaction volume.

One company, called Propy, has done over $4B in transactions since its founding in 2015. Propy helps users settle transactions in crypto, ensure proper property title diligence and transfer, and even turn houses into NFTs.

As more and more groups continue to build and innovate in the space, it’s extremely exciting to see smart executers utilizing modern technology and working together to progress the tech-enablement of outdated industries.

How Blockchain Has Revolutionized Real Estate Investing

By: Leah Golubchik

Although the real estate industry has traditionally depended on face-to-face interactions, firms have been forced to reshape their structures due to the Covid-19 pandemic. As the real estate market continues to adapt to changes in response to the pandemic, the industry has become more reliant on technology in all sectors. One of the newest advancements to make its way into the field is blockchain, which has revolutionized the real estate market. This digital-asset craze has continued to skyrocket over the past few years, and has infiltrated both personal and commercial real estate investing.

Real estate investing has numerous drawbacks that prevent structured and accessible movement of transactions. For example, the industry has high barriers to entry due to extremely high capital requirements. Further, economies of scale play a part in real estate investing, as well-connected firms and individuals have access to greater opportunities, which can even include off-market transactions. Lastly, real estate is vastly illiquid, making it hard to divide and convert its value, therefore it is usually not owned in shares.

However, as this new technology penetrates the market, such disadvantages of personal and commercial real estate investing seem to shrink. Blockchain allows for a streamlined system of both information and value that anyone is able to obtain, as it is not possessed by a single entity. Furthermore, it eliminates the need for a middle man through smart contracts, which allow assets to be tokenized and be traded on the blockchain. This reduces the fees and commissions that these intermediaries charge, and makes the process much quicker. The decentralization of blockchain makes it highly transparent and immutable, which establishes that processing of financing and payments is more secure. The illiquidity issue is also solved with this technology, as tokens allow for real estate to be easily traded. This also opens up the opportunity for crowdfunding and fractional shares, as more investors will be able to participate in deals due to lower ownership liabilities and capital requirements. All of these advantages of blockchain lower the barriers to real estate investing and ensure the entire process of buying and selling these assets is dynamic and efficient.

The benefits of implementing blockchain into real estate investing are clear, but how have these developments emerged in the real world? Just earlier this year, the mayor of Miami suggested authorizing residents to pay property taxes or city fees with cryptocurrency. Soon after that, an anonymous buyer purchased a Miami penthouse paid fully in cryptocurrency for $28 million, which was declared “the most expensive known residential crypto real estate transaction in the U.S. to date.” In the commercial world, commercial real estate investor Aviva Sonenreich describes how online marketplaces are influencing this sphere, “For example, ATLANT is a platform that tokenizes properties; the trading can all be done online, and the tokens can be exchanged for fiat currency. From my perspective, understanding the value in tokenizing real estate is just the tip of the iceberg when it comes to the future of partnerships and investments on the blockchain.” New technological developments in the real estate industry are appearing everyday, and everyone is anticipating what the future of real estate transactions on the blockchain will look like.

Are We on the Verge of Another Housing Crisis? The Facts

By: Elijah Levine

In the midst of a growing economy, rapidly shifting political landscape, and a plethora of other factors, many Americans are wondering if a repeat of 2008 is right around the corner. There may be some validity in these claims, but before delving too much into whether these claims are right or wrong, let’s get the facts.

What Factors Indicate a Market Crash Is Coming

The United States economy is one of, if not the most, complicated economies in the entire world. At any given point in time, 350 million people are working to navigate hundreds of thousands of market factors, whether they know it or not. But what factors indicate that the market might be on the verge of crashing? Gord Collins outlines 13 critical factors that tend to contribute to a crashing economy.

1. Excessively High Home Prices

2. Increasing Underwater Mortgages

3. Fast Rising Interest Mortgage Rates

4. Rapid Reduction of Government Spending

5. Slowing Economy/Sudden Rises in unemployment

6. Wage Growth not Keeping Up with Home Prices

7. Geopolitical Shifts Specifically Pertaining to Tax Changes

8. Trade Wars

9. Volatile Stock Market

10. High Levels of Consumer Debt

11. Rising Cost of Living

12. Risky Low Rate Mortgages

13. High Energy Prices (oil, gas, etc.)

What Does This Mean for Us?

It is obvious why many of these factors would contribute to a crashing market, however, these factors are not equal across the United States. Some cities are still experiencing dramatic consequences from the last recession, while others have bounced back but are now faced with a series of other ominous factors. So how can one tell if the economy is on the verge of a freefall?

The short answer: we can’t, nobody can. Whatever happens to the economy is not the result of one single factor across the entire country, it is a combination of factors that exist all across the country in different capacities and intensities. That being said, there are some critical factors affecting the economy as a whole right now that must be considered.

Currently, despite a very strong GDP and relatively stable real estate economic status, interest rates are rising fast… very fast. The Federal Reserve System (FED) is raising interest rates to as high as 70% in order to cool down our rapidly growing economy so that it doesn’t spiral out of control. President Trump is not happy about this, saying that this is a premature move as the economy will not reach critical limits for over a year. Experts agree, stating that every time the FED has raised interests rates this much this quickly, it has lead to a major recession. Experts state that raising rates kills off businesses and puts immense pressure on mortgage holders.

A major cause for the FED’s decision to raise the interest rate is arguably the most serious factor that indicates a crash is near: the current trade war with China. President Trump raised import tariffs from China from 10% to 25% at the start of 2019, and this is significantly affecting US businesses, in both good and bad ways. Importing businesses have been losing money as their costs have increased by 15%, while suppliers have gained business as purchasers may be actually saving money from buying domestically. Critics say that this is bad for our economy as it seems more businesses are hurt, rather than helped, however, others say that this is a step towards establishing a fair and mutually beneficial trade relationship with China. One thing is certain: if proper steps are not taken to ensure a mutually beneficial trade relationship, this trade war will only be detrimental to the United States economy and could pull other factors in the direction of a market freefall, something that nobody wants.

With all of this in consideration, 100 experts were polled on when they think the next recession is coming. The majority of them (22%) believe that the recession is coming in the first quarter of 2020. However, nobody can be quite sure, things can change. Trump may be able to figure out a proper trade deal, factors could not contribute as much as some people think, and the discrepancies between cities could shift. There are so many factors at play, but in looking at whether the housing market will crash or not, there is no definitive answer; only time will tell.

Cryptocurrencies & Real Estate

By: Elijah Levine

Cryptocurrencies have been around for quite some time, perhaps the most famous, Bitcoin, was created in 2009, however, it hasn’t been until the last two years that cryptocurrencies have been truly integrated into society. Cryptocurrencies are digital currencies which operate on what is called a blockchain. A blockchain can be thought about as an online ledger, where every single transaction is securely electronically recorded, with no means of hiding the transaction record. Although blockchains have the capacity to record any type of information, currencies have widely been digitally developed to operate solely on these platforms, these are called cryptocurrencies.

As cryptocurrencies become more integrated into society, the roles that they play in society will become more diverse. One of the main areas cryptocurrencies has seen interesting expansion is in the world of real estate. In the last two years, numerous properties in both Europe and the United States have been purchased using cryptocurrencies, and this is just the beginning. As this new technology becomes more prevalent in real estate transactions, and both buyers and sellers need to be aware of what this means for them.

Sellers need to be especially aware, as younger demographics who are more interested in and or more accepting of cryptocurrencies continue to enter into the market. Some of the positive things that sellers can look forward to are a wider audience, as more and more people start to accept cryptocurrencies, more and more people will be looking to make transactions with them. Not to mention that cryptocurrencies themselves have the potential to yield massive returns on investments. That being said, sellers need to be careful on the same account: cryptocurrencies are extremely volatile meaning that unlike other assets, they can lose their entire value overnight. Sellers are also faced with a very complicated tax situation, cryptocurrency tax law is extremely new and extremely complicated, something that sellers need to take into special consideration.

As for buyers, there are also a lot of ups and downs. First and foremost, giving buyers (who are assumed to be cryptocurrency holders) the chance to purchase real estate using cryptocurrency gives them a chance to diversify their assets. Not to mention that, different from cryptocurrencies, real estate properties are more often than not locked in profits, giving buyers safe investments that are almost sure to appreciate over time. Buyers also will have increased buying power, cash buyers typically have an advantage in real estate transactions and these digital currencies are no exception. On the other hand, buyers are faced with a limited market; as the use of cryptocurrencies for real estate transactions is still extremely new, there are very little properties on the market for cryptocurrencies. Additionally, when buyers put their cryptocurrencies into these presumably safer investments, they do miss out on the chance for future growth on their cryptocurrency investments. Finally, similar to sellers, buyers are faced with the complicated tax code surrounding cryptocurrencies.

It is clear to see that both selling and buying real estate properties with cryptocurrencies hold a series of tradeoffs. This is a common dilemma for any diversification of assets, however, in the case of cryptocurrencies, these trade-offs are especially high risk and high reward. This being said, blockchain technology and cryptocurrencies are developing and integrating faster than ever before. These technologies will continue to grow and become more and more integrated into both society and the real estate world, and they have the potential to completely transform both. So although the future might not be clear for what lies ahead, it is safe to say that transactions via cryptocurrencies are here to stay and are only going to become more prevalent as cryptocurrencies become more accepted by society. With this in mind, people and companies on both ends of real estate transactions should be prepared to adopt this technology into their practices. Those who get an early start are likely to have a competitive advantage and those who don’t may be left scrambling to understand and implement this fast-growing technology.

Partial-Interest Sales

By: Paulina Ruta

Although not a new strategy to commercial real estate, partial sales have become increasingly popular for “large property deals,” billion dollar buildings for example. This is largely due to the mutual appeal to both the buyer and seller of the property. For the buyer, it has become increasing hard to finance such large purchases, and therefore buying in smaller chunks makes it feasible. In addition, foreign buyers get to have their investment tied to a local expert, decreasing their risk of entering an unfamiliar market. On the seller end, partial-interest sales allow them to hold onto a part of the property to continue benefitting from appreciation while moving onto other deals. As stated by Doug Harmon, chairman of Cushman’s capital markets group, these deal are a “marriage” between investor and owner and are the current trend.

Statistics Summarized:
2017: 83% of all deals on Manhattan office buildings were partial-interest sales Comparable to 2015, where 42% of such sales were minority-interest sales
2016-2017: minority-interest deals made up 17% of total sales dollars Comparable to 7.1% recorded during the previous 10-year period.

Article reference: https://www.wsj.com/articles/why-sell-a-billion-dollar-building-when-you-can-unload-a-piece-of-it-instead-1520776800

Blackstone's Maui Deal

By: Sara Michaels

It was recently reported that Blackstone is buying the Grand Wailea resort on Maui for 1.1 billion dollars. Blackstone is set to buy the hotel from GIC, which is Singapore’s sovereign wealth fund. The purchase of the property has yet to be made public, so much of the details of the detail are unannounced. However, if the deal goes through, it would be the second-largest hotel deal for a U.S property in history.

The Grand Wailea is a 40 acre and 780-room resort that is currently managed by Hilton. Located on Maui’s southwest shore, the hotel has three restaurants, a spa, nine pools, a 2,000-foot-long river, 11 tennis courts and more.

Along with purchasing the Grand Wailea resort, Blackstone is set to purchase the Turtle Bay resort on Oahu’s North Shore for $330 million. According to the Hotel Management magazine, these two new acquisitions would mark Blackstone’s return to the real estate market in Hawaii, which ended two years ago after the company sold the Hyatt Regency Waikiki Beach Resort.

Real Estate Market in European Cities

By: Paulina Ruta

Many factors that are out of the hands of both the buyers and sellers heavily affect the Real Estate Market specifically when it comes to high-end real estate and investment properties. This has been clearly demonstrated in the European market with recent political unrest heavily affecting the stability of many real estate markets.

In the UK, Brexit is definitely partly to blame for London’s decline in prices. People fear the unknown and for many months the nation was heavily divided. However, as the dust settles, prices in recent months started to decrease at a much slower rate; perhaps there’s hope for the future.

On the other hand, with President Emmanuel Macron’s election in France, Paris is on the rise once again after nearly a decade of decline (or very minimal growth). Its low interest rates coupled with newly found ‘stability’ are very appealing to investors.

A government policy change in 2012 completely changed the game of real estate in Portugal, when it granted residence permits to non-European nationals. In 2012, prices in Lisbon rose by 35% and have been on an upward trend since. In other cities such as Santo António and Misericórdia consistently see year-to-year growth of over 35%.

Dublin has seen steady growth and had a tremendous year with 11.6% average price increases. However, predictions for the future are a bit more conservative as the Central Bank of Ireland is said to be releasing stricter mortgage lending rules.

Finally, Berlin has seen high growth rates for the past three years that many credit to the newly booming tech industry. Predictions for the future are more stable but still positive.

Article reference: https://www.wsj.com/articles/luxury-real-estate-runs-hot-and-cold-in-europe-1516290485

Commercial Property Sales in New York City

By: Jonathan Kohan

For the first-time New York, has fallen behind both Dallas and Los Angeles in commercial sales. In New York, commercial real estate sales have declined by over 56% when comparing this fiscal quarter to the same fiscal quarter in 2016. The sales of New York commercial properties dropped to 14.1 billion, whereas real estate investment in both Dallas and Los Angeles equated to 15.1 billion and 21.2 billion respectively. This is a big national shock as New York is consistently ranked as the number one area for real estate investment. Overall, this has significant importance nationally as commercial property sales overall have decreased by 9% from 2016. This suggests that we as a nation are shifting from the hyper-supply aspect to recession aspect of the real estate cycle. This is backed by the notion that Real-estate industry participants in New York state that the slowdown is being caused by the extremely high values that have been reached after the lengthy bull market that has been occurring. Both buyers and sellers seem to be disagreeing on price values thus causing a stalemate. Many individuals believe that there will be a continuous slowdown until one side is forced to crack.

Sources: Grant, Peter. “New York Falls Behind Dallas and Los Angeles in Commercial Property Sales.”The Wall Street Journal, Dow Jones & Company, 24 Oct. 2017, www.wsj.com/articles/new-york-falls-behind-dallas-and-los-angeles-in-commercial-property-sales-1508884185.

Real Estate Landscape in West Africa

By: Oluwafeyikemi Makinde

The lack of infrastructure investments in Africa specifically in growing metropolitan areas in west Africa such as Nigeria and Ghana has led to a unique phenomenon in the real estate market. This has allowed for developments that are mixed use and allow people who chose to be in these spaces to have access to the office space, housing and retail that they might need to enjoy the expanding middle class lifestyle that is becoming more accessible to them. The idea of live, work and play that is inherently associated with any mixed use development in the west and seen as relatively innovative, but this has become almost a necessity for up and coming real estate developers in Africa. The mixed use spaces are going to be able to help reduce traffic in highly congested cities and hopefully reduce the load on the already strained municipal and state infrastructure systems. Reducing the commute may help the African nations stay ahead and increase the efficiency of the work force.

The push for innovative real estate solutions is something that the current Lagos governor continues to push for even the affordable housing to be more mixed use so that the efficiency increase is captured across all income levels. In Ghana the One Airport Square area in Accra is becoming a flagship location for a mixed use facility in west Africa. The development includes a hotel, retail and residential. The increased developments means that private developers can move around the slow moving public infrastructure development, and many real estate professionals hope the upcoming WAPI summit would bring together investors and public officials to help coordinate on strategy for development in the regions.

Sources: https://www.cnbcafrica.com/apo/2017/10/09/lack-of-infrastructure-drives-demand-for-mixeduse-developments/

Industrial Sector Update 2/7/2016

Industrial Properties Continue to Gain Momentum in the US Market

The industrial sector rose to tie with the multifamily sector at the end of 2015 for the most desired U.S. property type by foreign investors. In addition, speculative construction hit pre-recession levels, and almost half of the 130 million square feet of planned construction is already pre-leased. The national industrial availability rate dropped to 9.4 percent, maintaining the 23 consecutive quarter streak of falling vacancy rates. But having such great returns for a long period of time has driven investors to be wary of the market, with many speculating that the expansion cycle may be reaching an end. But according to John Morris, the logistics and industrial services lead for the Americas at Cushman & Wakefield, although we are seeing yellow flags in the market, there are indicators that signal more expansion to come. For example, the massive increase in foreign capital coming into the market and the large amount of class-B property out for sale are signaling that we have yet to reach the end of this massive expansion cycle. With the shift to e-commerce driving up the demand for industrial space and organisations like Chicago-based Brennan Investment Group developing multi-million square foot logistic parks, it is safe to say that we should still be keeping an eye out for more stunning statistics coming from the industrial sector.

http://nreionline.com/industrial/industrial-sector-ends-2015-still-middle-innings http://nreionline.com/industrial/industrial-sector-ends-2015-still-middle-innings

Auto Industry Driving the Return of Domestic Manufacturing

From 2000 to 2014 there were virtually no new auto plants constructed in North America. But in 2015 almost one-third of the world’s new auto plants under construction are in North America, a large portion of which are located within the United States. This is all in an effort to streamline processes and reduce costs to manufacturers, which has become especially important with the emergence of electric and self-driving cars in the market. Nevada has become a hotspot for these sites, with Tesla motors recently announcing the construction of a $5 billion lithium-ion battery factory and competitor Faraday Future selecting North Las Vegas for the site of its $1 billion plant. Both sites attracted over $340 million in tax incentives and subsidies from the state, which has established itself as a strong national competitor for new manufacturing facilities. Over the past several years, General Motors, Honda, Nissan-Renault and Mercedes-Benz have opened offices in the San Francisco Bay area. With the close proximity of these offices to potential manufacturing sites in Nevada there is a strong promise of more developments to come. With these auto plant developments comes the promise of over 5,300 new jobs and the rise of the automotive industry in the United States once again.

http://nreionline.com/industrial/whats-behind-recent-rise-auto-plant-development http://nreionline.com/industrial/whats-behind-recent-rise-auto-plant-development