Unlocking illiquid assets through tokenized real estate
Family offices in Asia with commercial real estate are facing challenges from rising interest rates, post-COVID lower profit margins and illiquid assets. These factors are creating uncertainty and generational turmoil with the families. The traditional approach to real estate investment may no longer be practical in the current market and economic conditions. Tokenized real estate is a solution that can preserve the legacy, unlock liquidity and source new investors.
Tokenization - transforming the real estate landscape for family offices
Tokenization offers an approach to real estate investment by digitising ownership rights and representing them as digital tokens on blockchain networks family offices holding real estate projects can use tokenization to enhance liquidity and gain access to global capital markets and international investors
Enhancing liquidity and reducing risk
One of the primary concerns for family offices holding illiquid real assets is liquidity. By tokenizing real estate assets, family offices can fractionalize ownership and allow investors to purchase digital tokens representing fractional shares of the property. Fractional ownership increases liquidity by enabling global investors to buy and sell property tokens on digital platforms.
Unlocking growth opportunities and market access
By tokenizing their real estate projects, family offices can tap into global capital markets and expand their investor base. Most traditional real estate transactions are complex, paper-driven, time-consuming, labour-intensive and require lots of meetings with expensive advisers.
Tokenization streamlines the investment process by enabling rapid settlement of transactions on blockchain networks with 24/7 automation of tasks and trading capabilities. This streamlines the transaction and enhances efficiency for the investors and the family offices.
Who is buying the tokens?
The target market to buy tokenized real estate includes high-net-worth individuals, institutional investors, real estate funds, family offices and blockchain crypto investors looking to diversify their portfolios with fractional ownership and high-value properties. These investors are attracted to the fractional ownership model for its potential returns and diversification in global real estate. There is a growing market of Blockchain and crypto investors who are interested in diversifying their portfolios with high-value properties through tokenization. Blockchain technology enables fractional ownership of real estate allowing investors to own a portion of high-value properties that were traditionally out of reach. Many blockchain and crypto investors see tokenized real estate as a way to diversify their portfolios, and access new global investment opportunities. In addition, the investors do not need to worry about the maintenance., tenants, or management of the property, this will be managed by the family as before
Token projects launched
Tokenization projects gained popularity with blockchain technology and smart contracts.
The Aspen project in 2018 was a luxury resort hotel in Aspen, Colorado. Its investors purchased tokens representing fractional ownership and potential returns from rental and property appreciation. Other tokenized real estate projects have also been launched in New York City, Phoenix, and Austin.
Asia and Hong Kong regulations
Hong Kong’s Securities and Futures Commission has recently passed new regulation which is positioning HK as an Asian hub for digital projects. Tokenization projects should be discussed with your lawyer to ensure your projects meets the regulatory requirements.
The Ho family story
The Ho family is a multigenerational family office with a history of investing in successful commercial properties across Asia. The family patriarch built a successful real estate empire and instilled in his children and grandchildren the values of long-term wealth preservation and strategic investing. The family lived a very comfortable lifestyle and the properties provided dividends for maintaining the family lifestyles. However, when the patriarch passed away, a generational divide began and a call for change. The next generations were eager to explore new ventures and investment horizons.
They voiced their concerns about the family offices conservative approach to real estate holdings. With interest rates rising and property incomes reducing they proposed selling a portion of the families' legacy commercial properties to unlock cash, reduce bank debt, and make cash available for the next generation to explore other investments. This proposal sparked a heated debate within the family and highlighted the diverging views on the family office's future.
Bridging generational differences
When the family was unable to sell the real estate and remained burdened with debts and higher interest rates, generational conflicts took precedence at the family meetings.
The family looked for a solution that could keep harmony, preserve the real estate legacies, and provide income and capital for the family.
Tokenized real estate captured the attention of the family as a bridge between tradition, liquidity and wealth preservation.
Tokenized real estate platform for the Ho family provides a solution to unlock liquidity, paid off bank debts, maintains a legacy for future generations, and provides individual investment aspirations for the younger generation. The family is discussing the transaction with their advisers.
In conclusion
Tokenized real estate is projected to be $1 trillion market for family offices. It also offers the potential to maintain family harmony, manage financial challenges and market uncertainties. We are also working with other families holding legacy properties, warehouses zoned for hotels, and real estate developments along with a castle and golf course.
With the family office preserving their wealth, fostering harmony, and embracing new opportunities, the legacy can grow and be protected for the next generations.
Ann Cooley is the Chairman of Pacific Hawk Asset Management Ltd (“Pacific Hawk”). The company is a multi-family office, providing investment advisory services for families and institutions.
Ann has managed assets with families in New York, Europe, and Hong Kong, including the Rockefellers, Rothschilds, and Cadbury. She is responsible for the investment strategies for her client portfolios and the Pacific Hawk Global Fund OFC. She has been managing assets and funds for families for more than 25 years.
