What is the “property chain” and how can it be broken?
3 mins reading time
26 October, 2018
Tokenistation of Assets
3 mins reading time
26 October, 2018
As we have been saying all day, at Metrovacesa we maintain a proactive strategy of continuously searching for ways that help us to improve our relationship model with our customers.
In this context, tokenisation and Smart contracts allow us to carry on improving in transparency and efficiency in buying and selling a dwelling, by digitalising the process.
More specifically, the project we are presenting today, developed with the collaboration of Grant Thornton and the Brickex platform, gives us the following:
A unique opportunity to delve deeper into innovation applied to improving the process of buying and selling dwellings. For me this has been a “practical master’s course” in blockchain
An alternative sales channel. At Metrovacesa we have a portfolio of assets that appeals to a wide variety of target publics: from the private national customer buying his/her regular dwelling, through overseas customers more interested in a holiday residence, to institutional investors, etc. With this project, tokenisation enables us to reach a target public outside our usual scope through the traditional sales channels, such as international institutional investors.
With this aim in mind, when selecting the assets we considered to be a good fit for this first project, we focussed on:
finished product, which should mean a shorter DD process
Something interesting as an investment alternative, through rent management, for example
Something that would attract an international investor (2nd residence), although the door is always open to Spanish institutional investors
A minimum investment target of €1.7 million.
Having selected the product, the next step was to confirm the interest of the target public, for which we carried out a reserved sale process, with the help of Grant Thornton.
We already have the interest of two potential international investors in two packages of 83 dwellings with an approximate price of €15 million and €10 dwellings for €1.7 million, respectively.
So far, everything is quite earth-based. When does tokenisation come in?
This is where the Brickex platform comes into action.
The first thing is to generate a Metrovacesa account in Ethereum in which different portfolios of our assets for sale, like those I mentioned earlier, are tokenised.
Metrovacesa creates another account in Ethereum, an escrow account, which will be managed by smart contracts that the investor can audit, and the purpose of which will be to make the process transparent, fair and efficient.
As I will show below, Brickex reflects these tokenised assets in a kind of virtual shop window and allows investors to invest in them, with the following sequence of events:
Study of the proposal: The investor selects the token under study
Display of interest/ non-binding bid: If the investor is interested in investing, he/she will mark the option “invest” and “make non-binding bid”, which leads to the tokens being transferred automatically to the escrow account, which is viewed in Ethereum; the token is then “temporarily blocked”, placing a reserve on the product for the investor, while the smart contract events are executed.
Execution of the Smart contract (conditioned self-run code): once the tokens are blocked, the programmed sequence of events for a typical asset purchase process are executed: PBC, KYC, DD, closure of the operation. These Smart contracts, currently in the development stage, bring added transparency for the potential investor and will be auditable by external organisations like Grant Thornton.
Closure of the operation: The execution of the Smart contract can end with:
Option 1: closure of the operation. In this case the tokens are unblocked and are transferred with their attributes to the wallet selected by the investor.
Option 2: If the Smart contract is not executed in full, the tokens are unblocked and return to the starting Metrovacesa account.
We are currently working on the platform and estimate that within 2 months it will be 100% operational and open, with the complete process and a broader offer of Metrovacesa product.
During the development, we will continue to carry out operations with investors in “boutique” model, to build from this customer and ensure that these “events” / Smart contracts are appropriate for the needs of the international institutional investor.