CinderBlox is a United States based company that is equipped with deep industry knowledge and regulatory licensing for investment real estate. By combining their expertise in real estate with Chintai’s white labeled blockchain technology for tokenization, issuance, and secondary trading, the teams will embark on a new frontier to revolutionize the ubiquitous asset class. The first issuance will be an equity raise of up to $27 million for a $100 million commercial real estate development in Chicago’s exclusive River North neighborhood.
Real estate is one of the world’s oldest assets and the most reliable method of building wealth. However, the real estate investment market is characterized by two key issues that blockchain technology can solve:
1) Very low liquidity, making it difficult to transfer and sell. Single transfers are manual, costly, and usually takes days.
2) Very high capital requirements, which puts the asset class out of reach for most retail investors.
Blockchain technology can be used to encode the characteristics of an asset into a unit of digital value (token). Tokens can be broken up into many digital parts. This enables fractionalization of real estate, as opposed to the traditional methods which store titles in singular units.
By digitally fractionalizing real estate, deep liquid markets can form on secondary trading platforms, resulting in significant reductions of both time and costs to transfer. And rather than having to own enough capital to buy an entire piece of real estate, investors can buy small fractions to gain portfolio exposure that is otherwise unattainable for most people.
Highlights: Blockchain Revolutionizes Real Estate Investment
By using Chintai’s white label blockchain services, a team like CinderBlox can forgo burdensome development costs, and focus on applying their industry level expertise to rapidly bring their product to market. In this case, market analysis shows that efficiency gains can result in the following outcomes in the joint pilot:
- Lower barrier to entry and reduced capital requirements for investors
- Access to wider pool of capital for issuers
- Greater opportunities for portfolio diversification and targeted investments
- Trade 24/7 globally
- Automated compliance (encoded and executed in the token, account, and protocol layer)
- Efficient and near-instantaneous settlement
- Greater liquidity than traditional capital markets
- Eliminating current illiquidity discount may increase Net Asset Values 20%-50%
- Significant reduction in legal, administrative, and compliance cost
Only a handful of real estate asset tokenizations have been successfully issued, with less than $5 billion announced for potential deals in a multi-trillion dollar addressable market. Furthermore, these tokenizations are taking place under Regulation D, available only to accredited investors, with five-figure USD minimum investments.
The 2012 JOBS Act makes it possible for entities to issue securities and raise funds outside of traditional capital market channels. As a result of these recent technological and regulatory innovations, retail investors can now access highly lucrative real estate investment opportunities previously only available to institutions and SEC-accredited investors. CinderBlox is leveraging the 2012 JOBS Act to democratize access to real estate investment.
Many real estate tokenization platforms are still experimenting with unattractive assets; CinderBlox will only offer high-yield assets in high-growth markets. Furthermore, competitors have no liquidity in current offerings, while being too early to market, unsupported by high-performance security token exchanges, and limited to accredited investors.
Most issuers are tokenizing on the Ethereum blockchain (which is capacity constrained, cannot support high velocity transactions, and unable to handle full on-chain regulatory compliance) or on lesser-known, less-performant blockchain protocols. In contrast, Chintai offers the highest-performing blockchain technology on the market for issuance and secondary trading. Their technology is compliance enabled and fully automated on-chain.
This makes it possible to take complete advantage of the efficiency gains of blockchain technology, while removing friction that has historically plagued the industry. All Chintai components will operate unnoticed on the backend, supplying the engine for a CinderBlox branded and operated investment portal.