October 14, 2021

Contributed by SEGAL LLP

Segal LLP Managing Partner leads session on the tokenization of real estate assets.

“The only constant today, is change,” says Dan Natale, Managing Partner at Segal LLP and host of the “Tokenization of Real Estate Assets” session at Moore Global’s July 2021 Real Estate and Construction Summit Series, “Building a Global Future.”

As Natale notes in the session introduction, upcoming millennial and Gen Z cohorts, “will use and incorporate technology and new financial tools to further democratize and expand accessibility to real estate investment assets. It’s very clear the real estate sector is not immune to these changes in society. Real estate executives must accept and adapt to be successful in today’s changing world.”

To provide insight on how to tackle or adapt to these changes, Natale hosted a panel of experts who shared new and exciting ideas on how real estate executives can approach:

  • liquidity for commercial real estate owners
  • identifying regions suitable for future capital investment
  • promoting gender and racial equality in hiring/leadership
  • considering both the environment and new construction techniques
  • alternative sources for raising capital

Today, the cost of selling real estate assets is high, while barriers to investing in such assets are also high –– tokenization reduces these barriers and is truly democratizing. Tokenization allows the next generation of individual investors to purchase equity stake in a piece of real estate. Together, the combination of tokenization and blockchain platforms, makes it possible for individuals to buy and sell interests in standalone real estate assets.

So does this new product type take away from traditional capital-raising platforms? Noah Buxton, one of the session panelists and Blockchain Practice Leader from Armanino LLP, thinks it does.

“I think software eats the world and this is just another example of software eating into another market,” he says. He goes on to explain how tokenization works and notes that one of its key value drivers is, “it’s creating fractional ownership that was never before feasible.”

But how do you go about auditing this type of product?

Managing Partner at Moore Cayman, David Walker says, “to audit them, I think, we have to have familiarity with the technology…and when it’s done properly, using a blockchain platform or distributed ledger technology, allows to get more comprehensive coverage when it’s done correctly. There can be a higher level of accuracy or confidence when it’s done properly.”

Lori Stein, Partner at Osler, Hoskin & Harcourt LLP, says Canadian securities regulators have identified specific risks related to digital assets that all investors should know. They’ve set out disclosure guidelines related to a) the custody of these types of digital asset b) public company audit requirements for digital specific controls and c) the structure/type of issuer of the investment asset.

Though there is some complexity to tokenization, Natale recommends, “embracing new tech platforms, because what we know is that future consumers of real estate will demand change.”

Watch the full session here!

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