Last Friday was an exciting day as our company RedSwan CRE formally announced a partnership with Coinbase to accelerate adoption of blockchain digital securities backed by commercial real estate. Please click here for the original press release.
As I mentioned in my inaugural Medium post, we are using blockchain tech to digitize equity limited partnership shares of Class A CRE, making large buildings more tradeable, liquid, and affordable. RedSwan CRE is helping real estate sponsors/owners raise equity capital from accredited investors in the US under Reg D and foreign investors under Reg S. With RedSwan CRE, subject to any initial legal holding period requirements, an investor in a CRE building can now securely buy and sell his/her ownership portion, represented as digital tokens, potentially in seconds. With blockchain, minimum investment amounts for primary issuance can be as small as a few thousands of dollars.
RedSwan CRE functions as its own registrar and transfer agent. This means that all the CRE-backed digital securities are held in a single vault. As these securities get issued and later change hands in the secondary market, RedSwan CRE maintains an ownership record trail for each token’s entire life cycle. This is where our key partner Coinbase comes into play. Coinbase will be serving as the central, secure vault for all our current and future CRE-backed tokens. By having the tokens reside in a walled garden with RedSwan CRE maintaining ownership data, RedSwan CRE can easily communicate important information to investors, distribute property updates and financial statements, and direct the quarterly (or monthly) income to securities holders. In addition to core custody, Coinbase will be providing other value-added services to help us grow.
Coinbase is probably familiar to many of you with experience trading cryptocurrencies such as Bitcoin and Ether. Launched in 2012, Coinbase today has more than 35 million retail investors globally that use it to trade crypto. What is lesser known is that Coinbase also has an institutional grade, New York stated regulated custodial business, which is whom we have partnered with. As a regulated entity, Coinbase Custody is subject to the same scrutiny and capital standards as well-known custodians of traditional assets such as State Street and Bank of New York Mellon. With cryptocurrency as its DNA, Coinbase also grants RedSwan CRE the capability of accepting investment subscriptions in stable coins such as USDC. A crypto investor who wants to diversify a portion of his/her portfolio into CRE backed digital securities can pay for their investment, if they choose to, by converting their Bitcoin (or other) crypto into USDC and remitting those to RedSwan CRE. This is a unique offering for the industry. Meanwhile, investors familiar with traditional assets can be assured that if they invest in a token issued by us, it will be backed by top quality real estate assets and will just as secure as their regular stock and bond holdings.
We are excited that we will be entering the market shortly. We believe real estate backed digital tokens represents an especially attractive investment option for investors in digital assets. I believe Bitcoin is here to stay and serves as a viable store of value. That said, cryptos can be extremely volatile and do not generate income. By diversifying into CRE-backed digital tokens, one can reduce the overall volatility of a digital assets portfolio. After all, the value of commercial real estate is inherently more stable. In addition, the investor in real estate collects income as the property generates excess cash after all expenses and debt service payments are made. RedSwan CRE’s offerings, the first batch of which will launch later this Fall, offer total IRRs in the high teens to low 20% range, with some deals offering investors a preferred cash yield in the 8–9% range. With Coinbase as one of our key partners, we can make all this a reality for the “small” investor.
Once again, I am excited to share our progress through Medium and invite everyone, especially Accredited Investors, to follow me and visit our marketplace on Redswan.io for more information. Becoming an investor in institutional quality commercial real estate is now within reach!