AssetBlock partners with Algorand in a bid to launch a $60M Real Estate Investment Platform

By xaviercote | blockchainInsights | 29 Sep 2019

Real estate startup AssetBlock has launched its tokenized property investment platform on the Algorand blockchain. AssetBlock was able to leverage its joint venture with Lodging Capital Partners (LCP) to announce $60 million worth of tokenized hotel properties on the platform. LCP is a premier owner and asset manager of high-performing, luxury hotels. Investors will eventually be able to directly exchange ALGOs (Algorand’s native currency) for a share in the properties.

Real Estate - The Current Scenario

Real estate is the largest asset class in the world. In fact, we need to through some numbers at you to help you understand its scale. Back on 26 January 2016, London-based real estate advisor Savills came up with some staggering numbers:

  • The total global real estate valuation came up to a whopping $217 trillion. Residential property made up 75% of the total value.
  • By that point, the total value of all the gold ever mined was $6 trillion. In other words, real estate was 36 times as valuable as all the gold ever mined!

Based on their study, Savills came up with the following conclusion:

“Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.”

However, despite being such a powerful industry, it has been plagued by a host of issues:

  • High barrier to entry: Real estate has garnered a reputation of being a playground of the rich and famous. Simply put, the common man can’t enter this space.

  • Lack of transparency: As per the United Nations, around $800 billion - $2 trillion are laundered every single year via real estate.

  • More middlemen, more fees: A simple real estate transaction has several middlemen involved. As such, you will need to compensate every single one of them, which bloats up the total fees.

  • Illiquidity: Real estate doesn’t move that fast, making them one of the most illiquid assets in the market.

  • Transaction speed: Real estate deals are extremely slow. On average, it may take you six months to find a suitable property and another six months to fulfill all the formalities.

The digital asset space also has been hampered by inflexibility. Investors are highly interested in diversifying their portfolios by investing in tokens backed by physical assets.

What is AssetBlock?

AssetBlock was founded in 2018. The company wants to bring in positive disruption to the real estate space by leveraging Algorand’s secure and scalable blockchain technology. They believe that they will be able to create real estate investments that are more accessible, secure, affordable, and efficient. As CEO and founder, Mike Liddell puts it:

“We created AssetBlock because the modern economy was in need of modern technology. We saw an opportunity to build a solution that brings traditional and non-traditional real estate investors and professionals together efficiently, creating more opportunities for all involved. Lodging Capital Partners represents the caliber of real estate investment partner that AssetBlock is proud to offer access to on our platform. LCP has invested in a portfolio of properties valued at more than $1.5 billion and continues to deliver strong performance.”

Why Algorand?

Algorand is an open-source software company that has been envisioned by cryptography pioneer and Turing award winner Silvio Micali. It utilizes a first-of-its-kind permissionless and pure proof-of-stake protocol that allows it to provide a high degree of scalability, open participation, and transaction finality.

AssetBlock chose Algorand because of it:

  • Builds a borderless economy which eliminated geographical barriers to entry.
  • Decentralizes participation.
  • Brings together investors and opportunities efficiently.
  • Meets AssetBlock’s high standards for security and compliance.

Steve Kokinos, CEO of Algorand, expressed his excitement by saying:

“AssetBlock is one of many innovative companies disrupting traditional business models by leveraging the power of Algorand’s blockchain technology. AssetBlock’s model to broaden capital pools for real estate investment aligns perfectly with our long-term vision of building a borderless economy by removing friction for these types of investment opportunities globally.”

The Solution

AssetBlock creates a unique offering by combining real estate investment with digital asset-based lending. Their platform will help create a thriving environment for:

  • Private investors and family offices seeking real estate investment.
  • Real estate partners seeking to lower their cost of capital.
  • Digital asset holders seeking diversification while maintaining their positions.
  • Lenders seeking yield, capital deployment, and liability limitation.

Here are the advantages that AssetBlock will offer real estate investors:

  • Private investors will be directly connected to upscale investments that were previously reserved only for institutional investors.
  • A digital-first approach will remove the inefficiencies of paper-based approaches. This will make transactions faster and cheaper.
  • The reduced transaction fee also decreases the overall price of the real estate structure, making it more affordable.

The advantages of digital asset holders are as follows:

  • AssetBlock will offer cross-collateralized loans for purchasing real estate without liquidating any of their crypto assets.
  • The loan will be collateralized by both the digital assets and the real estate purchased with the loan. Since its a combination of both digital and physical assets, it reduces the overall risk of the lender. Because of this, the lender will be able to make the loan at a lower rate, benefiting the borrower.
  • Holders will be able to enjoy the benefits of both cryptocurrency and real estate investments.

Busy Month for Algorand

Algorand has been attracting a lot of businesses to its blockchain lately and September has been an exceptionally busy month. IDEX, the #1 decentralized exchange (DEX) on Ethereum, had previously announced that they are planning to build their next-gen DEX on Algorand. IDEX believes that by leveraging Algorand’s blockchain, it can provide full finality, tokenization of assets, and programmatic transfers at the Layer-1 level itself.

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