tZERO, the security token platform that operates under the Overstock umbrella, has partnered with the Tezos Foundation and Alliance Investment, a UK-based real estate developer, to tokenize £500 million ($643 million) of real estate properties in the UK. The first project to be tokenized is River Plaza, a 180-unit luxury residential development located on the banks of the River Irwell in Manchester, England. This deal represents the UK’s first real estate-backed security token offering (STO) as the industry takes steps into the use of blockchain technology.
Blockchain Disrupting Property Industry
Alliance Investments plan to tokenize at least £20m of River Plaza’s value, with the STO using tZERO’s tokenization technology and issued on the Tezos Blockchain. The tokens, which are excepted to go on sale in Q1 of 2020, will provide investors with liquidity through tZERO’s trading technology, which powers blockchain-based trading system operated by PRO Securities, LLC, a subsidiary of tZERO. The STO will allow investors to own a piece of this new development which, in the words of Alliance Investments CIO Rani Zahr, has the potential to disrupt the way property is purchased and owned:
Raising funds through an STO is more efficient, cost-effective, autonomous and democratic than traditional financing. We believe that we are at the forefront of a technological change that can disrupt the current funding paradigm and we are delighted to partner with two global players that are leading blockchain innovation, tZERO and The Tezos Foundation, for our first STO.
Questions Remain Over Secondary Market
The River Plaza building is scheduled to complete in Q3 of 2022, with the remainder of the £500 million worth of real estate being tokenized over the “next several years”. Tokenizing items such as property, art, and classic cars is a great way for investors to diversify their portfolios and gain exposure to markets they may previously not have been able to, but it does come with the risk that, unless the secondary market is capable of catering to investors of all sizes, token holders are not left in control of the realization of profits, which are dependent upon the sale of the asset. As the space expands however and the practice becomes more common, liquidity could well become a non-existent concern.