Digital transformation is reimagining how people conduct business in every area of life—including investing. At times, technology has created entirely new investment options. However, there have also been times when it was possible to apply a new technology to a traditional investment model with impressive results.
RedSwan CRE is an innovative investment brand doing just that. The tokenized commercial real estate marketplace is using cutting-edge digitization to expand and improve one of the oldest sectors in the investment world: the real estate sector.
How RedSwan CRE Is Tokenizing Real Estate
The commercial real estate market is massive. It’s estimated that the commercial sector in the U.S. alone should surpass a valuation of $25 trillion in 2024. Along with its enormous inherent value, commercial real estate is classically seen as a high-profit investment option, even compared to its residential alternative.
Many people perceive commercial and residential real estate investments as having distinct advantages and disadvantages. However, upon closer examination, commercial real estate emerges as the superior choice, albeit with an important caveat.
The primary advantage of commercial properties is that they have higher profit potential. A categorically easy win. In contrast, the biggest benefit of residential properties is that they are priced at an accessible entry point.
It stands to reason that commercial real estate would be the better investment if an investor could access it. That is where RedSwan CRE comes into the picture.
The commercial real estate investment brand has created a commercial real estate marketplace that uses blockchain technology to fractionalize ownership of large commercial properties. This, in effect, removes traditional ownership documents from the equation. In their stead, RedSwan CRE creates blockchain-based digital security tokens.
Investors can apply the same concept of tokenization to commercial real estate. Rather than come up with massive sums of capital to purchase and pay for a commercial property, investors can now use RedSwan CRE's marketplace to purchase fractional ownership interest. This turns those real estate investments into RWAs, or real-world assets backed by digital ownership.
Fractional ownership broadens investor participation and makes it possible for hundreds of owners to participate pro rata on multiple properties. They can collectively pool their resources through RedSwan CRE’s marketplace and engage in commercial real estate transactions that would never be accessible on an individual level.
RedSwan CRE has proven this concept has real-world investing applications across the globe and in more than one scenario. This includes a historic agreement to onboard and tokenize a $4-billion real estate portfolio in late 2023 and the development of similar on-chain real estate activity currently in Africa and the United States.
These activities are regulated by the U.S. Securities and Exchange Commission (SEC), ensuring compliance and protection for investors. RedSwan CRE’s subsidiary RedSwan Markets LLC was recently approved by FINRA, the licensing body of the SEC, as a broker-dealer to process these transactions. In addition, RedSwan Markets will engage with institutional and accredited investors, providing a secure and trusted platform for high-value transactions.
Real estate is a reality around the world, and anywhere commercial real estate exists, there is potential for RedSwan CRE to fractionalize and tokenize its ownership.
The Benefits of Tokenizing Commercial Real Estate
The ability to tokenize something as tangible as a piece of commercial real estate begs the question: why do so in the first place? Why is it worth converting a single commercial real estate investment into fractional ownership like stocks using the blockchain?
There are quite a few reasons real estate tokenization is gaining popularity so quickly at the moment.
1. Boosting Liquidity
A primary benefit of tokenizing commercial real estate is its liquidity. Traditional real estate investments are known for being illiquid, meaning it can take a long time to buy or sell a property.
By tokenizing ownership, real estate assets can be divided into smaller, tradable units. This allows investors to buy and sell fractions of properties much more quickly and easily. RedSwan explains this further, “Investment managers will no longer have to classify all real estate as an illiquid asset, modifying the future investment benefit of accretive yield and liquidity options.” This increased liquidity opens up real estate investment to a broader audience and allows investors to better manage their portfolios by quickly responding to market conditions.
2. Streamlining Transactions
Real estate is notoriously slow. The act of buying and selling residential property can already take weeks at a time. Commercial real estate’s timeline is even slower and can easily take months to conclude a deal.
Tokenizing ownership removes all of that wait time for investors. They can simply purchase a fractionalized share of a property, add it to their portfolio, and wait for it to appreciate in value enough to sell.
3. Enhancing Transparency and Security
Along with simplifying property management through streamlined transactions, moving real estate investing onto the blockchain makes it more transparent and secure. Blockchain is a decentralized technology. It can trace the history of activities (including ownership) across a series of actions or “blocks” that are added by network consensus.
In other words, using the blockchain model creates a decentralized, immutable record of ownership. Once a new token holder has been added to the chain, they can retain possession of the token until another transaction takes place, adding a new block. This creates a remarkable sense of transparency and security, which is essential for investing on such a high scale.
4. Lowering Barriers to Entry
Tokenizing ownership of the limited partners allows for multiple-party participation of up to 2000 U.S. investors while still being managed by one qualified general partner to protect and operate the asset. This lowers the barrier to entry, which is a critical resistance point for investing on a scale like that of commercial real estate.
While commercial properties often require millions of dollars in down payments and other taxes and fees, RedSwan CRE’s decentralized tokens make it possible for ambitious but small-scale investors to buy commercial real estate with, in some cases, as little as $1,000.
5. Increasing Portfolio Resilience
Another positive of blockchain-based real estate ownership is the fact that investors can easily diversify their holdings. This is difficult when buying commercial real estate outright, as a single asset can require a significant portion of an individual’s capital.
By tokenizing ownership, RedSwan CRE enables investors to purchase fractional shares of multiple properties. This spreads out risk and increases diversification, even within the commercial real estate part of their portfolio.
Unlocking New Opportunities for Investors
RedSwan CRE’s tokenized approach to real estate investment is a shift in the traditional property investment space. In the same way that stocks allow for decentralized ownership of a company, real estate security tokens (STOs) open the floodgates for investors of all calibers to purchase fractionalized “shares” in massive commercial real estate deals around the world.
This is more than a new way to buy and sell real estate. The tokenized commercial real estate marketplace is redefining the kinds of investors involved in the process and the strategies that they employ when buying and selling real estate.
