The Red Swan real estate tokenisation platform is turning an idea into reality
Real estate is a primary target for tokenisation. Its size and intrinsic illiquidity makes tokenisation and fractionalisation unusually appealing for owners and developers, and investors are attracted by the opportunity to gain exposure to the asset class at lower cost. So it is not surprising that the real estate sector spawned the flagship tokenisation of shares in the St Regis Aspen hotel back in 2018. Among the real estate entrepreneurs that recognized the significance of that transaction three years ago was Ed Nwokedi, then working in the capital markets group at Cushman & Wakefield. Today he is the CEO of Red Swan CRE, a blockchain-based marketplace where issuers can raise finance for commercial real estate projects by issuing tokens to SEC-accredited investors. Dominic Hobson, co-founder of Future of Finance, asked him how Red Swan works and where it is going next.
Questions being asked
1. You founded Red Swan in April 2018 to use blockchain technology to change the real estate markets. What was the main problem (or main problems) you wanted to solve?
2. Have you raised external capital (I could not find any references at Crunchbase)?
3. What is the blockchain protocol you are using?
4. Red Swan CRE is a marketplace – an exchange – but real estate markets are not always synonymous with transparency. How much issuer information are you disclosing to investors (a) at issuance and (b) over time about the investment (e. g. the running costs, the rental income etc.)?
5. How is Red Swan getting paid for running the service (e. g. fund fees, transaction fees)?
6. What is the regulatory status of real estate tokenization in the United States?
7. How do you control the quality of the real estate assets you offer on the exchange (e. g. agent reports, physical visits)?
8. Where are your issuers coming from, e. g. real estate owners looking to take some money off the table by selling stakes, outright sellers, new developments or funds?
9. How does the issuance process work (e. g. is there a pre-sale period)?
10. What has your success rate been – are issuers reaching their funding targets?
11. Which sectors of the real estate industry (e. g. multi-family, offices) are proving most receptive to tokenization – and why?
12. Which sectors of the real estate industry (e.g. hotels, retail) are proving least receptive to tokenization – and why?
13. Are corporations interested in tokenizing their real estate portfolios?
14. Can you help banks tokenize real estate loans?
1. How useful is “fractionalization” (e. g. are issuers dispensing with minimum investment amounts because it’s possible to accept smaller amounts without incurring excessive costs)?
2. Which of the investor groups are hardest to persuade of the virtues of tokenization?
3. Do you offer funds for investors who don’t want to deal directly or which wish to diversify risk – and, if so, are the funds tokenized?
4. What are the advantages tokens have over REITs or property company shares (e. g. no minimum investments, no lock-ups)?
5. Most of your investors are “accredited/Reg D” (i. e. relatively wealth or sophisticated) retail investors at the moment. What attracts them?
6. What is the disadvantage of Reg D (e.g. investment restrictions)?
7. How do you “on-board” investors (i.e. checking accreditation by reviewing bank statements, running KYC, AML, CFT and sanctions screening checks)?
8. Have you considered broadening the appeal of your token offerings by going for full SEC registration?
9. Are you attracting foreign (i.e. non-US) investors – and must they be Reg S?
10. What types of institutional investors are active on your exchange (e.g. family offices, hedge funds, private banks etc.)?
11. What explains the reluctance (so far) of (most) institutional investors to get involved?
12. Can people invest using crypto-currencies or Stablecoins or do you support fiat currency only?
13. Can investors use their own wallets or must they use your Coinbase service (and if there is a choice, what do most investors actually do)?
14. What is the asset class your investors have traditionally purchased (e. g. REITs, property company shares, real estate loans)?
15. How are the properties valued – by surveyors, NAV, secondary market prices or some combination of all these techniques?
16. Investors like liquidity but real estate is intrinsically illiquid. How do you create liquidity in the tokens (e. g. bulletin board, market-makers, lead brokers)?
17. Red Swan has a relationship with Templum, the broker-dealer. What does that offer you?
18. Are the tokens tradeable immediately or is there a lock-up period or does practice vary?
19. You call the tokens “digital shares” rather than “tokens” most of the time on the investment dashboard. Does that mean anything?
20. How helpful to your business is the re-thinking of real estate as a result of the Pandemic (e. g. “re-purposing” of city centre properties)?
21. You have opened an office in Nigeria. What explains that?
22. Where do traditional real estate services firms (such as Cushman & Wakefield) fit in to a tokenized real estate market?
23. The tokenized real estate industry is only just getting going. What would do most to help it grow quickly?