Artificial intelligence, big data, tokenization are for sure three of the actual trends in the finance and investing world, real estate not excluded. We are clearly going into a direction of a more sustainable and digital way of investing. But how do they work? Is it the way to follow?
To give an answer to our questions: Jonas Detavernier, business developer at 2140 consulting, and Stephane Muhikira, Belgium Sales Director at PriceHubble.
Security token offering, what is it, how it works
To explain how Security Token Offering works, with us is Jonas Detavernier, business developer at 2140 consulting, an STO advisory firm whose mission is to make investments accessible to everyone by using tokenization technologies.
Jonas (2140 consulting) : A Security Token Offering (or STO) is a financing method based on blockchain technology. It’s a process in which fractional ownership of assets, equity or debt is offered in exchange for money. It’s far more advanced than any other traditional funding methods, thanks to the introduction of the digital security token, which is a third-generation blockchain token.
For example: suppose you have a building with ten apartments, valued at 3 million Euro. Currently, real estate developers sell each apartment separately for 300k Euro, having 10 clients in the end. With tokenization, the building is divided virtually into 1 million fractions of 1 Euro each, with each fraction represented by a digital security token. This way, everyone can invest in this real estate building with the amount of their choice (1.000 Euro, 5.000 Euro…), receiving a proportional return related to the investment. So instead of investing in a whole apartment, you can now invest in “bricks”, figuratively speaking, while receiving a proportional return related to the number of bricks you invested in.
We could say that one of the biggest difficulties of tokenization is regulation?
Jonas (2140 consulting): In just two years, a couple of European countries have been starting to understand the importance of tokenization. As a result, these countries are installing new laws and regulations dedicated to it. And that is important because let’s not forget we are working with “securities” here, which are regulated financial instruments. As well, with 2140 we invested a lot of time in the last two years to discuss with the regulators FSMA in Belgium and the CSSF in Luxembourg. Not to give a lecture about tokenization or anything, but to answer their questions and make them help understand what this technology has to offer. Thanks to these efforts both from lawmakers, regulators and companies like ours, we are all taking huge steps towards more tokenization projects.
Today with 2140, we don’t only do real estate projects. We help our clients tokenize any asset, such as for example art, forest, land, equity and debt.In theory, any asset that has an investment value can be tokenized.
How does big data and AI data help developers and regulators to build a city aligned to the new needs of the end users?
If security token offering is a new financing method which allows us to invest in a more safe and customised way, big data is “the most scientific way to get information” and drives your investment. To deep dive with us in the world of big Data and AI data we have Stephane Muhikira, Belgium Sales Director at PriceHubble.
Stephane (PriceHubble) : data is the most objective and unbiased way to get real time information on what is going on on the market, it is something crucial for the real estate professionals. It’s even more important when unexpected events, like Covid, happen: data really is the most reliable way to look at the market.
Our AVM takes into account 3 different datasets: offers, transactions, and price history. These 3 data layers allow us to get the most precise valuations. Surprisingly enough, looking at the past price trends is what allows us to predict price evolutions . Compared to other countries where PriceHubble is operating, it’s actually quite difficult to access real estate data in Belgium. Our realtor clients can thus use our solutions to conduct in-depth market analysis for the properties they have to sell or to rent, and enter all the characteristics of the property (its address, if the property is brand new or needs to be renovated, if there’s a balcony or a garden, basically all the informations that will have an impact on the price etc.), and in one click they will get not only the price or rent valuation, but a whole report about the property and its neighbourhood.
The second category of clients we work a lot with in Belgium are the banks. Here what is at stake is not necessarily the valuation in itself, but the customer experience. Indeed today, when the client is on his or her bank app, they can easily check their assets (and what they’re worth in real time) but most of the time they cannot have a proper valuation of their real estate assets. That is precisely what PriceHubble provides to its banking clients: tools to offer their end-users a premium real estate experience, putting meaningful advice and strategic input on their client’s property at their fingertips, while also enabling them to detect buy-sell intents as soon as they arise.
Big data and AI data are crucial. But is the market ready?
Stephane experienced some challenges with developers and big financial institutions. These big accounts usually already have data analysts in-house, and they already understand the importance of data.
Stephane (PriceHubble) : Sometimes when we first start discussions with clients and prospects, we really have to convince them that their data will be safe with us, and that investing in a tool like PriceHubble will bring a huge added value to their day-to-day business and in the end, increase their revenue. Two of our main targets in Belgium are asset managers, and mid size or large size developers. The first category is not really interested in the price, the principal concern was the data. We discovered as well that developers didn’t have any digital tools to help them with market analysis or building simulations, besides Excel! . PriceHubble just developed a new feature, where you can see in one glance all the comparable properties from the online offers portals, and you can also upload your own data and build projects on the platform to make it more relevant. You upload your own data from Excel to PriceHubble and then you can keep on monitoring your residential assets portfolio . You can also make your research and market analysis based on the asking price, but also based on your own historical data.
What will be the future of financing in real estate projects and which role ESG requirements play?
For 2140 consulting, tokenization definitely will have its place in real estate financing in the future. The fact that real estate developers are able to expand their buyers market by reaching out to a younger client audience (they don’t have the financial resources to buy a whole apartment remember), is just one of the reasons why.
Jonas (2140 consulting) : Regarding ESG, in Belgium we understand that a lot of project developers always build with a 10 year mindset on sustainability and maintenance, because by law they are responsible for the first 10 years and then it’s over. But if they are tokenizing the building, it means that in most cases the developers remain owners of the building themselves for the whole period of tokenization, which could be a much longer time horizon than 10 years. In that case, it will only be to their advantage to include more sustainability in their real estate designs.
PriceHubble saw that there are some new types of investors. In terms of small and medium investors, they see some new activities like e-buyers.
Stephane (PriceHubble): This new category of real estate players will propose their clients to buy their house in just a few clicks. So you just put the characteristics about your apartment, or your house, and they just propose a price. You take it or leave it. They are like new realtors. In terms of institutional investors, we also see the new activity name SFR, single family rental. The principle is fairly straightforward: they buy an apartment, or a house, one by one, and after that, they consolidate them into one portfolio. So it’s completely different from the other strategy where you buy an existing portfolio and you try to rent or sell the properties. So now it’s a completely different way to buy a different apartment in a different building, and after that, you will end up consolidating your portfolio, therefore a new strategy. Now about the ESG. I think that this is really crucial now. As an example, we recently had a meeting with a client and we were more focused on gain of time, risk management etc. But their main goal was on ESG. ESG was and is already our roadmap, for example, it’s already live in France, we can now give a price valuation on properties based on ESG sensitivity.
“In Belgium, we have also planned to launch also that it’s something to help those players to analyse but also take into account ESG criteria”.
As mentioned at the beginning of our journey digitalisation and sustainable investment are the trend now, and also the way of the future. Certain Stephane and Jonas gave concrete examples and clear pictures of how it works: the two worlds of data and token, a big thank you and at the next round table.
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