Real estate in germany for 1€ with security tokens

Imagine any property in Germany that is very interesting from an investment perspective. Not a single flat inside a property – a complete property that is worth millions of Euros. The first problem is that many people cannot afford a property worth that much money. So the first idea is that many investors buy that property together and split it so they all own a share of the property they wanted to buy in the first place.

The problem is that the German land registry is not allowing multiple people as owners of the property (at least not as many people as required to buy a property with millions of Euros). And even if the German land registry would allow hundreds of investors, the land registry would need to be changed every time an investor wanted to cash out (which would mean high notary fees every time).

In order to solve the equity issue and the liquidity issue at the same time, one single person or company would need to be the owner of the property. E.g. a special purpose entity that has only one purpose: Purchasing the property the investors want and holding it. Thanks to the special purpose entity the land registry problems are solved.

Historically, that special purpose entity would need to go public on a stock exchange so that investors have the chance to buy a share of it. As Initial Public Offerings take years and cost millions of Euros, it is hardly worth it to split a special-purpose entity holding only one single property.

Instead of going public, the special purpose entity can also issue security tokens that represent a share of that special purpose entity, and therefore a share of the property the investors wanted to buy. E.g. 1 million security tokens for a property worth 1 million Euros (=tokenization).

As security tokens represent a legal claim against that special purpose entity just like a regular stock or a bond does, investors own a share of the property, a share of the rental income, as well as a share of the resale value with their security tokens.

Every investor owning security tokens in that special purpose entity could also vote on what is in the best interest of all security token investors. If +50% of all security token holders vote to sell the property, the resale value of the property would be split equally among all 1 million security tokens.

Tokenization combines the advantages of raising money in the private capital markets (e.g. banks) with the increased liquidity offered by public capital markets (stock exchanges). Because security tokens can be traded on a blockchain like Ethereum, Stellar, or Polygon around the clock 24/7 at virtually no cost.

Important: Blockchain does not automatically mean cryptocurrency, NFT, or another coin with no real value behind it. Security tokens represent at all times a legal claim against the underlying special purpose entity. So investors enjoy full legal safety as well as their share of the rental income and resale value in case the property gets sold.