According to the recent reports, RealBlocks, the blockchain-based technology platform that allows democratization for investing in real estates with the help of tokenization, received seed funding of $3.1M from Funding players who were led by seed funding firm Science Inc. which has more than $1.3 billion Portfolio Companies acquired till date. Other funding teams included Morgan Creek Digital, Zelkova Ventures, Ulu Ventures, and Cross Culture Ventures.
Brief Industry Outlook
Real estate is a cyclical industry which is highly sensitive to fluctuating external factors like changing interest rates, movement in the supply-demand cycle, and the rise/fall of the economy. This section of investing is also relatively more expensive than the other asset classes available for investors, lifting up the involved risk aversion factor. (RealBlocks finds this situation as a catch, and the Company aims for tokenization of the real estate sector using blockchain technology.)
The various types of real estate properties include Multifamily or Residential, Office, Retail, Industrial, Hospitality and Miscellaneous. This opens up a wider perspective pertaining to real estates and the multiple choices available for investment.
Source: JLL Research, Real Capital Analytics
The above chart data shows that most of the real estate properties mentioned here have undergone cyclical incremental change with a time duration of 4-5 years. After this time period, the volume is observed to slash down drastically to smaller numbers within a year time.
While considering investing in real estate, evaluation mainly is done using the common metrics like Cash Flow, Net Operating Income and Cap rate which is used as a rate of return and risk measurement.
Rationales behind the Investment in RealBlocks
The Company provides opportunities to retail and other small scale investors to invest in highly expensive real estate properties by democratizing the sector for investors. Tokenization is the key. The platform allows all types of investors to directly buy the real estate property in small quantities or in tokens using either fiat currency or cryptocurrency.
The Company believes, with facts under backing, that Illiquidity is the major concern for the current real estate sector. With the adoption of distributed ledger-based blockchain technology, RealBlocks aims for global liquidity in this investment sector. This avails the investors to indulge in a transparent environment, also providing the option to use cryptocurrencies for the purchase. The Company works on “security tokens” and not utility tokens which are highly speculative. Here the token is backed with the underlying real estate asset. Hence the price of the token is directly dependant on the underlying asset taken as the security.
RealBlocks is currently working on the Fund Compliance aiming to become an SEC-registered broker-dealer pertaining to the sales of security tokens. The Company plans to use smart contracts designed to make sure that the regulatory guidelines are being followed for each trading activity of the real estate tokens. This clearly means that no token would be allowed to move from a user’s wallet until it is confirmed, verified, and approved by the Company. Many other processes which include disbursements which are planned to be executed with smart contracts are currently under progress.
These 3 main features of RealBlocks: Liquidity, Global Access, and Fund Compliance, must be likely the topmost rationales considered by Morgan Creek Digital to invest in this blockchain-based real estate firm.
Source: RealBlocks White Paper
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