As with all industries, globalization is both a goal and a challenge for real estate investors. The difficulty of truly doing due diligence on a project half a world away — and the regulatory difficulties inherent in taking on international investors — have created barriers to facilitating global real estate projects.
However, the recently announced merger between StraightUp, a real estate project aggregator for Accredited Investors in the U.S., and Slice, an international blockchain-based real estate investment platform, may provide both the projects and logistics to create truly global real estate investments.
Straight-Up’s COO and co-founder, Omer Amsel, sat down with me to discuss real estate investment, the blockchain, and how this merger brings together the right projects and the right technology to create more opportunity for investors around the world.
Tell me about the world’s first international building projects.
We’re creating the opportunity for an inflow of investment from everywhere into U.S. real estate. The way we do that is first, on a more traditional level, we are licensing ourselves in major markets all around the world, and second, creating projects in L.A. and NYC.
We utilize blockchain technology to provide proof of ownership to international investors. We’ll then be opening the projects up to global security exchanges to allow for liquidity.
Usually these are investments where investor funds are locked up for four to seven years. We are aiming to provide more access to these types of projects and making the decision easier by eliminating the fear factor of the lock up period for investors. That’s how we’re aiming to disrupt the investor and developer markets.
How can real estate agents work with or benefit from a service like yours?
First of all, we work with all types of brokers and agents. We like to look at our platform as a real estate hub where everyone comes together. Once you have a global real estate platform, the projects need to be rented out or sold — that would be a harmonious exit strategy to the entire project.
If we can rent or sell these buildings, that makes sense in terms of monetization. We need the help of local agents and their expertise, so we are definitely looking to create relationships with these types of entities.
Agents and brokers in these markets also get early access to apartments and homes when they are under development, so we think that would be a good solution both on our end and theirs.
Straight Up is a service for Accredited Investors. Will the merger with Slice make it possible for smaller investors to have access to these investments?
We are still aiming for accredited investors within the U.S. because of regulatory laws that we need to adhere to. Internationally, there are jurisdictions with more lenient regulations regarding who can participate. We are also looking at ways to offer opportunities to smaller investors in the U.S. down the road.
In addition, we can take each project and build investment tools that are suitable for retail investors. The process for this is longer, so we are just now beginning to move into this space.
We are focused on the licensing in major jurisdictions — Singapore, Hong Kong, EU, and U.S. — then building the regulatory frameworks that allow us to serve those investors.
We are targeting institutional grade investments in prime locations and then seeking to democratize it beyond hedge funds and private equity funds.
We think of blockchain primarily in terms of financial applications like bitcoin. How is blockchain used in this case — merely within the financial aspects of the transactions or within the process itself?
It’s important to understand the difference. When talking about cryptocurrencies, there’s always the sense of the challenges and complications of that world.
What cryptocurrencies have in common is that they use blockchain as the infrastructure. But blockchain is, in the strictest form, a way to keep a ledger that is trusted by two or more parties without the need for a central party to vouch for the transaction.
Banks are usually the third party that we trust as a go-between in real estate and investment, but the blockchain allows us to bypass that management.
The opportunity here is to be able to have proof of ownership for part of an investment. Currently, you invest and sign a contract that defines your stake in a project, but that can have errors or the certificate can be lost.
What the blockchain allows us to do is manifest your shares and equity in the project in a way that’s indisputable. Later it allows us to trade ownership between investors.
We learned something from the 2017 IPO craze — given the right framework everyone wants to invest. If you think of the way private equity works, if I have ownership and it takes five years to come to fruition and I need some money, the developer would say “tough luck.”
But if your share in a real estate investment is tradable and there’s a constant price discovery, you can borrow against the current value, and it becomes bankable.
Everything is transparent and public. You can verify financials and data throughout the project.
Many investor-backed projects tend to be in NYC, San Francisco or L.A. Why are these cities especially attractive for investors? Are there plans to move into secondary markets at some point?
There is definitely the potential for us to go to secondary markets. We start with the path of least resistance — a project in NYC, L.A., or San Francisco are risk-mitigators for foreign investors.
It’s hard enough for them to invest in something that is not immediately tangible for them. They don’t necessarily have a good sense of foreign markets, but they know these cities, and they feel that they are resistant to market adjustments.
It provides added security. These are not necessarily the highest yields, but they balance risk and reward for foreign investors.