Case Studies Details

  • Home
  • Case Studies Details
banner
banner
banner
about
Blockchain Case Study on Tokenizing Real Estate Assets management

An asset manager from Paris encourages trust, transparency and efficiency of blockchain system where he decides start tokenizing ownership in real estate investment of a Paris Hotel.

about

Abstract

French real estate fund management company, Paris Capital. The company is utilizing blockchain technology in order to modernize and optimize the process of distributing shares. It also wants to better ensure its investor registry is accurate.

Asset tokenisation with help of blockchain , Paris Capital decides to jumpstart their venture with real estate investments by making investing easier by lowering the cost of registration, onboarding, and managing subscriptions from its associates. The long-term vision is to reduce minimum investor subscription amounts from €300,000 to €3. With the reduced upfront costs and increased digital functionality of blockchain, Paris Capital seeks to bring wider and more diverse pool of investors to real estate asset investments.

To achieve this goal, Paris Capital partnered with devblockex to issue security tokens for three separate funds worth a combined total of 550 million euros.

The first of the tokenization projects involve the ownership of a planned 11-story hotel currently under construction on the outskirts of Paris. The issuance of a total of 16 million Euros is the largest real estate tokenization project in Europe.

The challenges we overcame:

The real estate asset management industry suffers from the 3 following hurdles:

1. Large and costly funds creation, assets distribution, and registry maintenance

2. KYC and registration activity costs are high; depending on investment, there is a high initial subscription.

3. Investors have limited access to secondary markets. They don’t have the ability to trade assets easily and, without portfolio allocation strategies, they might not be able to get the right amount of results.

Asset managers like Paris Capital rely on paper to manage the investor registry. Digitizing the management of investments would help Paris Capital to save money, ensure accuracy in the paperwork, and achieve better oversight for its investors. In nutshell blockchain exponentially increase the value of the investment company like Paris Capital .

Our approach to the solution:

To perfectly manage investments of the hotel in compliance with regulatory requirements, Paris Capital needed to take authority of who could invest, and define the shares owned and transaction rules of each individual investment.

In order to initiate traditional approach of managing compliance requirements, investor eligibility and share issuance as dissociated manual processes, Devblockex Asset's Ethereum-based platform leverages smart contracts to portfolio the real estate asset. Where it define its compliance requirements, validate the investor's KYC profile, and issue corresponding fund shares to each verified investor.

The unnecessary burden on Paris Capital to go overboard for researching investors’ eligibility and the risk profile was removed through an invite-only process and KYC. Potential investors are screened for compliance and documents before they can create an account on the platform.

These files were then expedited off the Ethereum chain after being processed by Paris Capital, the issuer. The people who could purchase tokens were then verified by the platform before they went forward to participate in the investment.

Leveraging the precision and automation capabilities of Ethereum, the solution allowed eligible investors to define the nature and number of shares they would purchase, make the payment via wire transfer and receive the shares upon payment validation. The issuer authorized the transfer of tokens to investors through a certificate signed using their private key.

Upon completion, investors received a receipt of the sale detailing its transaction history (i.e. issuers, investors, number of tokens bought), and a link in the transaction on the Ethereum blockchain.

Smart Contracts: Technical

DevBlockex Assets enables the easy creation and deployment of smart contracts on the Ethereum mainnet. The company is using this platform to create new smart contracts based on standards such as ERC1400. The Devblockex community created the ERC1400 standard, which is used for representing financial assets on the blockchain. These highly configurable smart contracts and security tokens have the following features:

1. Security tokens support transfers, burns, and mints by an administrator

2. Security tokens support trade restrictions through off-chain certificate generation. Token transfers are conditioned upon the validity of the certificate, offering the issuer robust control capabilities over their financial assets across both primary and secondary markets

3. Security tokens enable you to create different classes of assets.

4. All smart contracts used were audited by Devblockex Diligence

The final product

For Paris Capital, the final result for its tokenised insurance include time and cost friendly with greater flexibility for customising products, and providing access to new classes of investors. The Paris Capital group was looking for a more efficient and secure way to process transactions for improving the transparency and immutability of information, and also to streamline reporting efforts.

With Devblockex's platform, The investor registry is automatically updated and maintained in one place, ensuring accuracy, transparency and security of the information.

“Innovation is one of the key components in Paris Capital’s strategy. We recently implemented an operational platform to secure all of our subscribers’ investment information,” says Souleymane-Jean Galadima, director of innovation and digital business at Paris Capital.

Paris Capital’s investment process is now scalable because of Ethereum. The blockchain makes it possible to do business with a global audience. International investors can easily access the platform since both KYC and distribution of tokens are processed on the blockchain.

As a broader objective, Paris Capital is hoping to attract more retail investors who will take advantage of the ease with which they'll invest in complex financial products. Paris Capital’s products offers more transparency and accessibility of information about financial assets. This increases investor trust in the company, which will lead to higher sales.

Baptiste Saint-Martin, product development manager at Paris Capital, adds: “ Tokenization is a new method of trading that will allow us to provide better liquidity to our investors.”

Tokenizing Real Estate Assets

Blockchain has the potential to play many different roles in the real estate industry. One of those roles is smart contracts for property transactions and data management for property listings. – The most viable and widespread application of blockchain technology today is through tokenizing assets, according to research by real estate services firm Cushman & Wakfield. In line with Paris Capital’s aim to enable greater participation in real estate investment, the report predicts that tokenization will encourage the commercial real estate market open up to a greater range and propescts of retail investors due to lower minimum tickets, greater transparency and more liquidity.

The opportunity to tokenize financial assets is set to reach the valuation in trillions in the next two years, according to the World Economic Forum, with half of that originating from alternative assets including real estate. The timeframe to realise this potential is generally thought to be much sooner for real estate compared to other asset classes, with early examples of implementing real estate tokenization, like Paris Capital, already making headway.

The opportunity to use blockchain for financial transactions is reliant on the development and adoption of solutions that can reduce operational complexity and regulatory risk. The results achieved by Paris Capital with Devblockex Assets’s platform demonstrate that tokenization can offer real estate funds with greater efficiency, transparency, and access to a wider investor pool and risk management without compromising the institutional standards that are fundamental to both investors and asset managers.