The American start-up is in discussion with AMF to set up shop in Europe. His offer? Sell real estate fractions in a few clicks thanks to blockchain.
Launched in 2019 by Canadians Remy and Jean-Marc Jacobson, the American company RealToken offers to buy goods on the US real estate market using tokens, digital assets issued and exchanged on a blockchain. This idea dates back to the year 2018, during which American judges recognized the validity of a token as an asset proving ownership of a company in the United States. This decision paved the way for tokenization and the two brothers, who head a Bitcoin foundation in Montreal, jumped at the opportunity.
For now, it is not possible to sell real estate shares directly in the form of tokens. Each property offered for sale therefore has its own company with its shareholders. The tokens thus correspond to the shares of these companies and intrinsically have real estate value. Their price starts at $50. On average, for a property valued at $100,000, the company that owns it has 130 shareholders. RealT appoints an internal property manager at the head of each company that can be changed if the majority of shareholders (token holders) so wish. Every month, shareholders receive dividends on their Ethereum or Gnosis portfolio in USDC, a stablecoin alongside the dollar. Dividends correspond to rents paid in US dollars by the tenants from which management costs and any unpaid claims or claims were deducted. RealT is remunerated in two ways, taking 2% of the property’s gross revenue and adding 10% to fundraising for the purchase of the property.
1,000 homes sold
Since RealT’s creation, $4 million of rentals have been transferred to its customers’ account. The company put up for sale 220 properties, the equivalent of 1,000 homes. It only takes an average of two minutes to sell all the tokens for a property valued at less than $500,000. During property listings, a customer cannot purchase more than 10% of the total tokens.
Initially, RealT advanced the money to buy the property, which was then tokenized and sold. From now on, the sale of tokens finances the acquisition of the property during the passage to the act of signing. If the funds raised are not sufficient for closing, the transaction is canceled and the funds are returned to investors. Jean-Marc Jacobson assures us that this never happened.
RealT’s real estate portfolio in the acquisition is worth $55 million against a valuation of $65 million
RealT’s real estate portfolio in the acquisition is worth $55 million against a valuation of $65 million. Jean-Marc Jacobson does not select “beautiful properties with high potential for value”, but privileges profitability. As proof, RealT offers an annual return between 6 and 11%. The co-founder, on the other hand, is less talkative about his company’s growth, contenting himself with talking about “exponential” results.
Leverage and DeFi
“There is no investment without risk”, recalls Jean-Marc Jacobson. According to him, the risks correspond to those of the traditional real estate market: unpaid bills, additional work, management problems. The main difference lies in the absence of a bank loan at the time of purchase of the property and, therefore, in the theory of the famous leverage effect expensive to landlords. Except it would be forgetting that RealT is a Web3 company. And whoever says Web3, says decentralized finance. RealT offers its clients a DeFi platform, RMM, wrongly dubbed by some as “RealT makes magic”, which allows them to find this leverage effect. By immobilizing their tokens in the RMM, a customer gets 50% of their dollar value, which can be reinvested by purchasing other tokens, while continuing to collect rents.
An individual can also decide to sell their tokens on the RealT platform for a 3% fee or for free on crypto platforms like Uniswap. At the end of the day, real estate tokenization makes the real estate market liquid and considerably reduces the time to obtain financing, as “everything is done in a few clicks”, Jean-Marc Jacobson boasts.
“Real estate is a very local business, each sovereign country tries to protect its territory, which forces us to adapt to the regulations of each country”
Accreditation in France
But not everything is so smooth for RealT, which daily bumps into the legal framework of securities. From a team of 21 people, 3 are entirely dedicated to the subject. “Real estate is a very local business, each sovereign country tries to protect its territory, which forces us to adapt to the regulations of each country”, specifies the co-founder. In Switzerland, residential properties are open to foreign investment as long as they do not exceed a certain percentage. For the purchase of real estate in the United States, it is advisable to create C Corp, in France it would be necessary to create SA or SAS. Contrary to what one might think, taxation does not seem to be an obstacle: “everyone is responsible for their tax in their country”, summarizes Jean-Marc Jacobson. In some states, possession of tokens is not subject to tax, in others it is considered a taxable title.
Marketing is very restricted: advertising a specific property is prohibited. For the future, RealT is seriously considering creating an app to facilitate the purchase of tokens and adapt to the habits of millennials. But the main project is international. Its 10,000 customers come from 135 different countries, but RealT currently only offers properties in the US real estate market. In the future, Realt intends to offer properties outside the United States (until the end of the year), but also investments in euros.
For this, the company must submit a file to a European financial market authority. The choice fell on France because of the francophony of the two creators. As RealT is an American company, it could benefit from exemptions during its establishment in Europe and would be subject to obligations, namely the prohibition of offering goods in excess of 8 million dollars. To the question “where is it with the regulators?”, the co-founder replies that “the process is moving forward”, without further details.