ScalingFunds, the blockchain-based real estate fund investment platform of Brickblock Ltd., is scaling up. The Berlin-headquartered company's product recently tokenized its largest ever single-property asset, a £30 million luxury residential property in Exeter, U.K.
Tokenization is a process by which fractional ownership interest in an asset is represented by a blockchain-based token. A blockchain is a decentralized, distributed and public digital ledger that records transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.
Brickblock, founded in 2017, has previously tokenized four smaller properties, CEO Jakob Drzazga said in an interview. But he said the tokenization of the recently built Exeter asset, owned by property development and investment company Uavend Property and Leisure, takes the company and its technology to another level.
"This is about the volume because, up until now, we have tokenized buildings which were around €2 million to €3 million," said Drzazga. "To have somebody who owns a €35 million property trust our technology to do this is a milestone, which shows that institutional investors are willing to go the extra step to take advantage of the digitalization of shares."
Uavend will offer investors the opportunity to buy and trade tokens or shares in the Exeter property by giving them access to a portal developed by Brickblock. The portal guides potential investors through know-your-customer and anti-money laundering checks before permitting them access.
"Incorporating ScalingFunds' technology allows us to more efficiently structure our financial holdings," Eamon O'Connor, CEO of Uavend, said in a statement announcing the tokenization of the asset. "This complements the innovative approach we take in real estate construction and development. Our project represents the first of what we expect to be many partnerships with ScalingFunds to explore new financing mechanisms."
The next step
The tokenization of the Exeter property is a stepping stone to Uavend launching a blockchain-based fund for U.K.investors. Brickblock has been working with the company on the project for about eight months, said Drzazga. "If it's successful, then they will definitely do a real estate fund with us, so this is relationship building," he said. "When you show that you can do something on a small scale, they can also trust you with going into real estate funds, which is obviously a bigger jump that has more value."
Uavend's commitment to further projects with Brickblock is part of a swell of interest from the real estate sector in Brickblock's technology, according to Drzazga.
In June, the company's ScalingFunds platform launched what it said was the first-ever real estate fund using blockchain technology, which aimed to raise €200 million. Peakside Capital's Peakside Income Fund 1 plans to invest in core and core-plus office properties in first- and second-tier German cities, valued between €15 million and €75 million.
Brickblock is also in discussions with two large asset managers about potentially launching funds using the ScalingFunds platform, Drzazga said, without mentioning names.
Brickblock is hopeful that at least one of these asset managers will decide to use the ScalingFunds platform in the next 12 to 24 months. "This tool helps asset managers reduce their cost significantly and expand their investor reach from a local to a global investor pool," Drzazga said, adding that it also offers much greater liquidity to investors who would normally be locked into a closed-end fund.
"I expect once we onboard a top 50 asset manager, this will create a wave where more and more will onboard with the technology," he added.
