Exclusive Interview with Co-Founder and Head of Product, Tegan Monique Gaan of Abstract Tokenization
Abstract Tokenization is a financial technology company developing a comprehensive Tokenization as a Service (TaaS) primary issuance platform for commercial real estate sponsors & investors that operates with smart contracts & distributed ledger blockchain technology. Tokenization converts illiquid private securities into tradable security tokens, also referred to as digital securities, that provide investors access to an advantageous digital ownership structure with a number of benefits over traditional securities.
CREtech: What does Abstract Tokenization do?
Tegan Gaan: Abstract's tokenization and funding platform will help automate the legal, technical, operational and servicing functions of an SEC compliant security token offering (STO) to raise capital via digital securities. This, combined with an investor portal as well as a comprehensive due diligence & service provider marketplace, provides real estate owners, developers and funds with an end-to-end process. The company's technology will be offered as a direct-to-sponsor and investor platform as well as a white label tokenization & automated servicing solution for commercial brokers, large sponsors & other issuers.
Subsequently, the company intends to develop a secondary market to aggregate trading of commercial real estate digital assets across various registered digital security trading platforms such as NYSE parent company ICE and Fidelity Investments, who have both recently launched digital asset custody and trading services, to unlock a liquidity premium of 15-30% for the underlying CRE ownership.
CREtech: What problems are you solving for commercial real estate professionals?
TG: Only $1.4 trillion of $217 trillion in global developed real estate assets (and $280.6 trillion in total according to Savills) was exchanged in 2017. Abstract is solving for this lack of liquidity to increase value and convenience. In addition to the liquidity challenge, a number of traditional CRE primary issuance, record keeping and investor servicing processes are currently not as efficient as they can be, with portions often still being done manually. The company is addressing these issues with smart contract driven investor servicing functionality, beginning with a real-time investor cap table, automated reporting & distribution processing built into each digital security issued. Furthermore, the ownership of the underlying real estate and each transaction, transfer and distribution of it is recorded to the blockchain's distributed ledger for immutable record keeping of a tamper proof, auditable data trail. In short, Abstract is creating the infrastructure and tools to make it easier for the CRE industry to evolve into the digital age of security ownership.
CREtech: What is the latest news?
TG: The team recently raised $500k in seed funding from strategic investors- owners, operators, developers and investors in commercial real estate. Now, we are about to starting raising our next round of $5 million via a convertible note. One of our co-founders and I just returned from speaking on the Fintech, Blockchain and Crypto panel at the 7th Annual Global Family Office Investment Summit in Dubai this month. Last month Abstract was invited to the Crypto Invest Summit in Los Angeles, where we participated in the Tokenization of Everything - Securities, Assets and Real Estate on the Blockchain panel discussion. We also have our first customer in American Capital Group on board prior to going live. The company has a few other exciting announcements coming up that we will be able to share soon as well.
CREtech: What are your views on the current real estate tech sector?
TG: We are thrilled about the rapidly growing rate of technology investment and adoption by companies in the real estate sector. In 2017, $12.6 billion in funding went into proptech start-ups, an increase from $4.2 billion the year before that, according to MetaProp. The Jobs Act has contributed to sparking change by opening up new opportunities in the capital markets, as evidenced by commercial real estate crowdfunding financing firms continuing to experience double and triple-digit annual growth.
Real estate sponsors looking to leverage change for the opportunity to offer additional benefits to their investors and an advantage over their competitor's offerings are now turning to blockchain technology to tokenize real estate ownership into digital securities.
-The owner of the St. Regis Aspen, closed an $18 million tokenized offering in October for a portion of the ownership stake in the 29,000 square foot luxury resort property in Aspen, Colorado.
-In early October 2018 a $30m luxury condo complex in Manhattan, NY was tokenized into security tokens each representing a portion of the value of the property, allowing people to invest with just a small investment.
-Peakside Capital, a European private equity firm, announced in October that they are working on setting up a tokenized real estate fund using blockchain technology.
CREtech: What are your future plans?
TG: We plan to launch Abstract's tokenization platform late January, with a demoable version available by mid December. The company is also in later stages of discussion with multiple broker dealers to form a strategic operating partnership as well as various investor distribution partnerships. We are looking forward to continuing to grow the team and expand the scope of the product.