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<\/a><\/p>\nIn the years ahead, blockchain and cryptocurrencies promise to make commercial real estate financing cheaper, faster, smoother, more transparent and more democratic, fostering a wholesale revolution in the way business has been done for centuries. While the commercial real estate industry has a reputation for being slow to adapt, particularly when it comes to technology, market participants are increasingly seeing the benefits that blockchain can provide to streamline their everyday duties.<\/p>\n
SEE MORE ON THIS TOPIC<\/a><\/p>\n Doing real estate transactions using blockchain\u2014a market Statista predicts will grow from $339.5 million last year to $2.3 billion in 2021\u2014will make buying and selling assets quicker and more transparent because it cuts out the typical \u201c16 middlemen between investor and investment,<\/em>\u201d noted Scott Picken, CEO of Hong Kong-based Wealth Migrate, which bills itself as the first global real estate financing platform integrated on the blockchain. Blockchain effectively \u201cdecentralizes trust\u201d by removing those middlemen, thereby cutting costs and improving investor returns.<\/p>\n Scott Picken, founder of Wealth Migrate, explains blockchain\u2019s potential for democratizing commercial real estate investment during a 2017 event in Atlanta.<\/p><\/div>\n \u201cThe transaction clears instantly and the funds are available to the seller side of the transaction as immediately as they are received,<\/em>\u201d added Gerard Marrone, a New York City real estate attorney and founder of The Praetorian Group, which is pioneering blockchain and cryptocurrency investment through its effort to create the world\u2019s first cryptocurrency linked through real estate. He added that there are no fees attached to blockchain-based transactions outside of negligible mining fees, which are paid to those whose computers are clearing the transactions.<\/p>\n Marrone also noted that the extended clearing issues that occur in traditional commercial property transactions and financing deals because of the large check or wire transfer involved would not occur in a crypto asset transaction.<\/p>\n \u201cThe old phrase \u2018time is money\u2019 is very relevant in the commercial property space,<\/em>\u201d he held. \u201cTime saved is worth very much more than the \u2018paper\u2019 savings.<\/em>\u201d<\/p>\n In addition to simplifying real estate transactions, interest in the blockchain is growing so rapidly because it opens the real estate market to a wider swath of investors, noted Picken.<\/p>\n \u201cForty-nine percent of the world\u2019s wealth is held in real estate, (but only) 12.9 percent of the world\u2019s population has access to investing in real estate,<\/em>\u201d Picken said. \u201cCurrently, if you want to invest you basically must have millions of dollars; Blockchain will allow people to participate for fractions of that.<\/em>\u201d<\/p>\n Of all the benefits blockchain provides to commercial real estate, the most significant will be the enormous profit the early adopters will achieve from their ability to leverage the technology\u2019s coming upswing in use, Marrone argued. His firm plans to use cryptocurrency as a vehicle to raise capital and buy a mix of residential and commercial properties, as well as to \u201cprovide access to these investments to the average Joe\u201d so they are not locked out of the \u201cwealth-generating benefits of property ownership.<\/em>\u201d<\/p>\n \u201cWithout the crypto piece, this raise would be significantly more difficult and likely only involve institutional and accredited investors,<\/em>\u201d he added.<\/p>\n The Praetorian Group is hoping to secure SEC approval by this summer to launch the first-ever real estate-backed cryptocurrency, dubbed the PAX token, through the first Initial Coin Offering (ICO). The firm would use the proceeds raised from the ICO to create a portfolio of commercial and residential properties throughout the East Coast and west into Texas.<\/p>\n Another firm pioneering the use of blockchain in real estate is ShelterZoom, which calls itself the first blockchain-based real estate platform specializing in making the offer and acceptance process easy. Launched in November 2017, the ShelterZoom Offer NOW website widget and mobile app use Ethereum, a distributed public blockchain network, to provide buyers, sellers and brokers with a simple and standardized offer process while reducing paperwork. All parties are also offered full visibility, with the ability to receive push or text notifications and instantly chat throughout the offer process.<\/p>\n ShelterZoom Video<\/p><\/div>\n But according to Chao Cheng-Shorland, co-founder with Allen Alishahi of the New York City-based startup, the technology can be taken a step further, for uses like virtual commercial real estate auctions.<\/p>\n \u201cPeople bidding through blockchain is far more effective than having a physical auction in one place,<\/em>\u201d she said. \u201cIt also opens up opportunities for people to invest from overseas in commercial real estate. We are actually trying to build the auction model through ShelterZoom.<\/em>\u201d<\/p>\n Maxwell Ellerhorst, managing director of information services and technology with Atlanta-based Trimont Real Estate Advisors, noted that his firm is also among those exploring the potential of blockchain and crypto technology. Trimont is in the process of developing a blockchain concept of commercial property that will define individual properties with a unique key and record the properties on a blockchain with a basic dataset, such as name, location and property type. The property records will be \u201ctokenized and programmatic access to the key and dataset would be made available to property purchasers,<\/em>\u201d he explained.<\/p>\n The platform would provide a simpler purchase option, eliminate the buyer\u2019s need to manage property information in their own systems and records, and allow new data to be issued with a reference to the unique key, he added, \u201cmaking it secure and unidentifiable to anyone other than authorized token holders.<\/em>\u201d<\/p>\n While initial steps are certainly being taken in the real estate industry to implement blockchain and cryptocurrency, there are several hurdles to overcome in order for the technology to reach its full potential. The first is its \u201cdisruption of a venerable, opaque industry filled with incumbents that include banks, behemoth law firms, giant real estate investment trusts and commercial brokerages. There will be tremendous resistance at first,<\/em>\u201d Picken affirmed.<\/p>\n ShelterZoom Video<\/p><\/div>\n Marrone agreed, adding that \u201cnone of the big names like Cushman, CBRE or others seem to have taken a foothold in the space.<\/em>\u201d Nonetheless, he added, some firms are beginning to get on board. For example, New York City-based real estate investor Cardone Capital recently began accepting bitcoin to invest in real property transactions that the firm is undertaking.<\/p>\n Picken added that long-held governmental practices also pose a challenge.<\/p>\n \u201cIn an ideal world, all government offices would move their deeds offices to the blockchain, but the real estate asset base is the most valuable asset many countries possess. So players have to tread very cautiously,<\/em>\u201d he affirmed.<\/p>\n Countries like Estonia, the United Arab Emirates and Barbados are more \u201cforward-looking<\/em>\u201d in creating their own cryptocurrency and using blockchain technology, \u201cbut the Americas, Englands and Chinas will take a lot longer,<\/em>\u201d he said, adding that the latter nations will have \u201cparallel systems<\/em>\u201d where they operate both traditional deeds offices as well as blockchain-based deeds offices.<\/p>\n But Picken summed up blockchain\u2019s main challenge as comparable to what the Internet confronted at its inception: creating an agreed-upon TCP\/IP protocol.<\/p>\n<\/a>Early Adopters<\/h2>\n
<\/a>Kinks in the chain<\/h2>\n
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