Michael Chetrit, a principal of the Chetrit Organization, has partnered with Leaseum Partners, a London-based real estate investment firm, to raise a $250 million tokenized real estate investment fund.
The 10-year fund, which will invest in commercial real estate in Manhattan, will be securitized into digital tokens that can be traded on token exchanges. The primary advantage of a tokenized fund is its liquidity, says Steve Sillam, Leaseum’s co-founder and CEO.
Like shares, the tokens will come with voting, dividend and redemption rights. The value of the tokens will be tied to the value of the portfolio, and token holders will receive dividend payouts from rent income, as well as capital gains once the fund expires, Sillam explained.
Once the private placement phase is over, Leaseum will launch a crowdsale, open to all accredited investors. Unlike digital coins like Bitcoin or Ether, Leaseum’s tokens will be classified as securities as defined by the U.S. Securities and Exchange Commission, not currencies or utility tokens, because their value will be based on a real-world asset.
However, if the cryptocurrency makes is in its infancy, the tokenized securities market is embryonic. There are few tokenized securities, and currently no existing security token exchanges, partially because of the lack of regulatory clarity.
Recent developments indicate the tokenized securities market is emerging. Startups like OpenFinance and the Overstock-backed tZero are developing security token trading platforms and, in February, the Goldman Sachs-backed Circle acquired Poloniex and announced its intent to accept security tokens.
Leaseum will invest in the Manhattan market because of its stability, and because it appeals to a broad range of investors, Sillam said. He and his partners had initially considered starting a global fund so it would be more diversified, but were soon convinced that investors prefer betting on a single market. “Everyone wants a piece of Manhattan,” said Sillam. “It should be an easy sell.”
The crowdsale is scheduled for the third quarter of 2018, and the first returns are expected in 2019.
Chetrit could not be reached for comment.
The Chetrit Organization spun off from the development firm — the Chetrit Group, run by Joseph and Meyer Chetrit — in 2011. The Chetrit Group and their partners recently sold the site of a 1,300-unit project in Mott Haven for $165 million.