Commercial Investment Real Estate Winter 2020 | Seite 45

list” (a way of confirming that the acquirers of the token satisfy vari- ous legal requirements) of poten- tial participants to create a liquid market? 3. Are new automated platforms or apps developed to satisfy the foregoing and comply with legal requirements? Presuming these issues are addressed, tokenization could provide token holders in private REITs with much of the same bene- fits as unitholders in public REITs by provid- ing them with tradeable, and thereby liquid, tokens (in lieu of traditional, non-tokenized units). Second, and perhaps more impor- tantly, it provides REITs (public and private) with the ability to raise money at different asset levels and at more favorable terms. Most stakeholders in REITs own shares in a public company that is the gen- eral partner in an umbrella partnership (an UPREIT) or units in the UPREIT itself, each of which directly or indirectly owns all the real property assets of the REIT. Also, some REITs have a DownREIT, which is a part- nership below the UPREIT that only owns a few of the REIT’s assets. Tokenization can unlock several additional variations of the foregoing arrangements, enabling unique debt and equity issuances and thereby Tokenization may also reduce administrative fees and costs by cutting out brokers, servicers, and other third-party service providers by lever aging automation via smart contracts. creating more ways for REITs to fundraise. For example, a public REIT may de- cide to tap into the token economy in lieu of seeking traditional public or private equity or debt for a particular property acquisition or refinancing. Tokenization could allow the REIT to tap a wider, non-traditional group of investors. Such an issuance would, argu- ably, provide access to cheaper capital, due in part to the investors’ presumably fragment- ed, and thereby less powerful, position in the market. It could also provide more flexible terms (including for debt, such as more fa- vorable debt covenants and less restrictive prepayment penalties). Finally, tokenization may also reduce administrative fees and costs by cutting out brokers, servicers, and other third-party service providers by lever- aging automation via smart contracts. It is important to consider what token holders stand to gain from tokenization. Investors who otherwise would not have ac- cess to certain investments could find them- selves, thanks to tokenization, swimming in new investment opportunities with reduced transaction and administrative fees as a result of efficiencies captured by the REIT. In addition, the token could be coded with “smart contracts,” providing token hold- ers with clarity with respect to transaction terms, servicing/payment, voting/control, and real-time information and reporting. Lee Samuelson Partner at Holland & Knight in New York, where he focuses his practice on complex commercial real estate transactions Contact him at [email protected]. Shawn Amuial Real estate and technology associate and a member of the firm’s innovation committee Contact him at [email protected]. Lifelong Learning Access complimentary education and research to help you adapt and thrive Free to all CCIM Institute members, CCIM Institute offers complimentary webinars and industry reports that cover a variety of topics affecting your business, including climate risk, lease accounting, tax policy, real estate market cycles, and more. To learn more and gain access, visit www.ccim.com/members-only CIREMAGAZINE.COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 43