Tokenized Real Estate Reality Check
I hate to say that I told you so, but I literally told you so.
Welcome to 10XTS Insights by me, Michael Hiles. I am the CEO and founder of 10XTS where I lead the team of merry hooligans working to solve awesome technology problems. If you’re getting this, we’ve directly interacted somehow in the past, met at a conference, connected on LinkedIn, a friend, colleague, or otherwise connected.
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Good morning!
As you know, I have been extremely critical of the so-called “Securities Token” projects in the blockchain space.
While we are completely on board with the concept of “tokenizing assets”, our approach is very different than the mere act of creating a token on a public blockchain and calling it a share of equity, et al.
Starting back in 2018, several high profile real estate tokenization projects were supposed to have fully disrupted the industry with promises of better liquidity, blah blah blah.
The expectation was all this PE and institutional dry powder would somehow or another rush in and force the disruption due to overwhelming demand for liquidity.
Guys I know like Josh Stein, founder of Harbor, and Todd Lippiatt, CEO of Propellr, had huge projects in the works.
Harbor was working on a big deal to tokenize student housing in South Carolina. It died (although that was because some sloppy lawyer didn’t read the fine print from their US Bank mortgage— which is surprising since Stein used to be a federal attorney).
Propellr is a licensed broker-dealer, and had a big project going with another partner. That died.
Yesterday, Coindesk published a pretty stark article about the failure of the market to rush in and adopt real estate tokenization as the next wave—and specifically focusing on... {drum roll} Harbor and Propellr.
In fact, it was one of the best, most realistic articles I’ve ever seen Coindesk publish, considering their role in the prior years of constant hype driving the unrealistic expectations in the market.
Specifically, Todd Lippiatt spit out some real truth bombs:
Instead of institutional participation, the hype led to a kind of “adverse selection” phenomena, said Lippiatt, attracting people who didn’t have a better option to raise funds, or who had spent a lot of money building blockchain token infrastructure and wanted to follow through with one of their own projects.
“I think at one point we had $3 billion worth of interest in tokenization,” Lippiatt said. “But once you started to sift through it all, there was a bunch of people who wanted to raise money for really bad deals.”
Todd probably doesn’t remember what I said about tokenizing assets in NYC exactly a year ago at the World Blockchain Forum. We were on a panel together… discussing securities tokens.
In fact, I used words like “security tokens are mostly snake oil”, and that I “didn’t mean to be a dream stealer but there’s a reality that’s being ignored.”
I hope he doesn’t hold it against me. I know they were all squirming there in front of the audience of hundreds of major players including big institutionals.
And even before, back in September of last year, when I was invited to participate in the Congressional Round Table for blockchain policy, I sat right behind Harbor CEO Josh Stein, who would occasionally shoot me stink eyes for saying the same kinds of things.
Sorry gents, it wasn’t personal at all. In fact, I like all you guys and want everyone to be spectacularly successful in all of this.
I have different philosophy, we didn’t buy into the hype, and we have a totally different approach.
I sure wish I had the millions you guys raised for your companies in spite of yourselves. I never begrudge a man his hustle.
Maybe I’ll get there at some point, but at least it won’t be at the expense of my investors funding castles in the air.
Alright, off to bake some pecan pies.
CIAO!
Michael Hiles, CEO
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