The first real estate Blockchain is on the way. A European private equity firm is working toward setting up the first Blockchain real estate fund. Here is everything the real estate community and investors need to know and more details on when and how this is happening along with things to watch.
What is Blockchain?
The first major application of Blockchain technology was bitcoin which was released in 2009. Bitcoin is a cryptocurrency and the Blockchain is the technology that underpins it. A cryptocurrency is a digital coin that runs on a Blockchain. The Blockchain behind bitcoin is a public ledger of every single transaction that has taken place. This ledger cannot be tampered with or changed retrospectively. Many experts in the technology say that bitcoin transactions are more secure and safe than current systems.
Everything You Need to Know About the First Real Estate Blockchain
Peakside Capital is working with Blockchain specialist Brickblock to launch a fund that will be “tokenized,” which means investors will get virtual tokens that are accessible and tradable via a Blockchain, rather than traditional limited partner units. The founding father of Peakside, Stefan Aumann, said that using Blockchain for a fund will allow a company to attract new types of investors, reduce the cost of running funds and increase liquidity.
There are many commercial real estate firms that have sold stakes in individual properties using Blockchain, but this new real estate Blockchain will be the first time a fund has been created using Blockchain technology.
Peakside is hoping to raise anywhere between $10 million and $50 million for its first fund using the system along with making core and core plus investments across Europe. Peakside currently manages around $1 billion of majority value-add assets.
The fund will be marketed to European investors and is still seeking approval from European regulators but will be monitored closely to see if a model can be created that could be used by managers around the globe. Liquidity will increase because the tokens investors will get will be much simpler to trade in the secondary markets than units in a fund.
Cost of Blockchain
It will be more cost effective for investors to invest with Blockchain and for managers to manage a fund on the Blockchain. Currently, funds set up a separate legal entity as a special purpose vehicle in which they own a stake, with that company being managed by a separate trustee. Blockchain helps reduce costs by doing away with this structure and process.
Blockchain Concerns There are two big concerns when it comes to Blockchain. First is the fear of theft by hackers and the second is the risk of money laundering. Investors within the fund would still need to vet clients with Brickblock’s technology managing the process. There would also be a separate legal record who owns stakes in the fund, so if hackers stole the tokens, then investors would not lose their stakes in the fund.