Welcome to another episode of Me & Mrs Jones. Here we are in Marbella outside the Marbella Arena. Now newly christened, it was formerly the Plaza de Toros de Nueva Andalucia, And today we´re going to go inside and meet a very interesting gentleman. Come on. A very good morning from Jones In Marbella. This morning we're sitting in the beautiful Arena
here in Puerto Banus. This incredible architectural structure was built in 1965 and inaugurated in 1968 as the Plaza de Toros, the Bull Ring, for many people very controversial but i'm delighted to say that now it's being transformed into a fabulous place of entertainment ,enjoyment, culture, all sorts of conventions conferences and in fact just this last weekend was the International Padel Tournament, held in this venue. So we're sitting here today and sitting next to me is a very interesting gentleman called Alex Rapatz. Good morning Alex. Lovely to see you here today. Thank you for joining me all the way from Austria. May i say so you're very very welcome here in Marbella. And I´ve asked you to speak with me today to bring a little bit of information to us about the, if you like the technology of tokenization of real estate. In my humble opinion, there's no question that tokenization of assets and actually blockchain as a whole is undoubtedly the future. There is no future without being able to understand this concept
and of course being in the business of real estate myself i'm particularly interested to know how it applies to real estate. You have a company in Vienna called Black Manta Capital Partners. So give us a little bit of a background about that company please Alex. First of all, thanks for inviting me. Pleasure to be here. Yeah as you said
i'm Black Manta Capital Partners. I´m based in Vienna. We're a group of companies in Europe. We're in Luxembourg. We're in Cork, Ireland. We have a financial service institute in Germany in Munich for the whole European Union, and out of Vienna we do our advisory work. We focus on tokenization security tokenization and all kind of digital assets. With tokenization what does it mean? We convert rights to an asset into the token. So Alex could you start by explaining to us actually what a token is. So we take an asset,
it can be a real estate, it can be like a square meter in an apartment building, it can be a whole apartment or whatever, and we put the rights ....we transfer the rights and obligations onto the token. The token gets or becomes the medium of transport of rights and obligations attached to the real estate. We can also tokenize a security, an existing security like a stock or whatsoever. So can any asset be tokenized? Yes. So almost on every conference i've been the last years and with Covid it ´s not too many conferences, but there was always a panel with the topic "tokenization of everything" and you can tokenize everything if you want to . Why is tokenization so applicable in the context of real estate? So it's an investment vehicle, also tokenization we use it for investment purposes. As of today
if you wanted to invest into real estate it was either like you had a high threshold in terms of prices you had borders. So probably me, as an Austrian, I wouldn't invest into the Marbella real estate because I´m not living here. I have no idea about the market etc. And and you have a lot of costs involved taxes whatsoever. With tokenization we can fractionalize real estate we can like sell certain square meters only and we can we can provide real estate retail investors the opportunity to invest in bigger real estate. This is what we call the democratization. Correct. Somebody like me, I could never
afford to buy for example this whole building. But I could buy a small part of it. Yes that's the democratization. Yes ...and so there were other use cases or similar use cases like real estate crowd-funding, but in the crowdfunding mechanism you only provided the loan, subordinated loan in most cases, but you couldn't get real equity. So I could buy like a square meter of this arena and then participate in the value increase in an exit participation if it gets old or whatsoever or in in revenue income streams.
So you become an owner. Yes But it's an owner of the investment rather than of its use is that correct? Both is possible. And from probably now this was the perspective of the investor, retail as well as professional. From a real estate owner I can refinance my real estate. I can take out my equity risk and and get in like um investors in particular when it comes to development projects. Like as of today let's say 80% is financed by a bank and 20% needs to be financed by the real estate developer. In equity. You can take this 20%, tokenize it, get in retail investors they can
take a seat on the table in in a deal where they wouldn't have access normally. The developer took out his equity risk and make probably a bigger project because he has now more funds available. So when we're talking about the benefit of liquidity being one of the main factors of tokenization this is exactly what you're referring to. Yes. So why are we hearing so much now about tokenization? Yeah. I mean tokenization is now, security tokenization in the current use of how we use it with the blockchain technology, is I would say it's quite new. It's like around four years now. The concept of tokenization was already with crowdfunding . It's a similar concept.
But now blockchain for the first time enables people to create digital identities on blockchain so I can really create equity and identities, my own identity on blockchain, and not only digital copies. For example, if you send out an email today you send out the copy. Everyone can make as many copies as they want to or if you send it in pdf or whatsoever. On blockchain, you send it once. It´s probably easiest to understand as bitcoin. You send out the bitcoin
you don't have it anymore. The recipient has it. And the same as with tokens. I cannot copy tokens. So that's why I can create real equity and real identities we call it. There is a lot of skepticism expressed about blockchain, crypto, tokenization, relayed mainly by people who don't understand the science behind it. What would you say to them? I mean if you trust in technology or not that's the main question. What is indeed
true that um when it comes to blockchain it's also always associated with cryptocurrencies and there was a lot of scam in the past a lot of projects which like in the ICO hype a lot of projects failed. A lot of people lost their money. So that's why our way was....Okay, we get regulated by BaFin (German Financial Market Authority). We are financial service institute. We take care of all the regulatory uh and compliant topics, we KYC i(know your client) nvestors we AML (anti money laundering) and also check the product with the tokens itself.
We do due diligence etc so that people can trust and know what they're buying. On the other side uh the goal would be in my opinion that if for example people buy real estate tokens through us or for any other provider, they do not need to know that it's a blockchain. If I´m buying again an Apple stock, I have no idea how the underlying technology works. That's true yes So yeah and actually i don't care I mean that's interesting there comes the philosophy of the financial institutions that we know today which have been in existence for so many years have really done such a great marketing job on us, because we don't question it. We don't question the banks. We don't question that our money is is being used in the correct way. The fact is actually the money that's in my wallet is just paper it's
not even backed up by by the the value that it's supposed to be. But we don't question it anymore and I suppose the curiosity of of blockchain and crypto and everything that I think is going to be very significant in our future has to be has to be backed up by investigation. Once one starts to look at how it works or where crypto came from or what its applications are for the future and for me the democratization of of the world in that respect is is very very significant, then you start to understand that it's real that it's safe and that it's certainly not something that people should go into to make money now this is we're talking about the future we're talking about you know years to come. I mean that's why we need to have the discussion and all this educational work what is blockchain how does it work it's that way we need to have this now but in five to ten years no one will question it. Exactly right probably the trader said why do I need the internet ?I have my fax machine. It's perfectly working. You know the transition takes time. Yes, and it's almost like you're like a pioneer. You're at the forefront of the pioneer movement
into the future. I mean it's no question that that um it's significant and it's also interesting that most of the people involved in this industry are very much younger than my generation certainly. The best way that i can describe it is that somebody of my generation, I was brought up being educated in an analogue way, and as years have rolled on we're now living on the forefront of a digital age. Somebody like me I have to translate in my head from analogue to digital whereas someone like my son, who's never known anything different, just automatically understands the digital technology. And it´s probably the same for you as well. It's just something where you don't have to do that translation.
Yes, what i saw the last two years was a high profile professionalisation of the market, in terms of institutional investors, banks, pension funds, and our our clients and also our investors they range from like i would say very young people from 18 and also people who are already um retired. So there is I mean the majority are probably the younger generation. Our assumption was a few years ago that everyone who invests in cryptocurrencies wants sometime, on some day, to put his earnings into a solid asset class like real estate and therefore buy security tokens. But 99.9 percent of our investors are traditional investors who would invest in real estate anyway. But now with security tokens there's a new way to invest.
What do you think about the power of blockchain and its ability to completely disrupt the way that we have learned to do things? I think it just opens a new asset class to new investors. It does, but it also it negates the the need for for me, for you as a lawyer, for me as a real estate broker, for the notary sitting up here behind us actually in the plan in the Centro Plaza. He's not needed anymore. That's true yeah that you can you can avoid a lot of intermediaries. Yes. But listen it's progress it's evolution. It's not necessarily a bad thing and surely with tokenization comes another form of auxiliary services which are needed to support the tokenization of their product. But this is something we see in all in all industries not only with blockchain ....is really disruptive. So give me an example of a project that
Black Manta have facilitated in tokenization. So the first deal we made two and a half years ago was a Berlin residential real estate. It was in construction phase like 42 or 43 apartments and it was a use case. I said before like the developer, the majority was financed by the bank
and the equity portion of the developer was financed by real tokenization. And everyone starting from 500 year investment could gain an interest in the profit out of this project. And if someone invested for example 25 000 he got the preemption right on the apartment. So this was a an equity deal We currently are having a tokenized bond; a big Austrian real estate developer tokenized one of its shopping centres and is refinancing internally.
That's happening now? Yes it's a it's a bond um so from the structure, very traditional, but it's tokenized. So to understand, the commercial building has been tokenized providing the liquidity for the developer to upgrade his existing project? Fascinating. When we're thinking about tokenization of real estate specifically is it imperative that we have to engage with cryptocurrency? If we tokenize an asset and we store it and we trade it essentially on a blockchain do we have to connect it with crypto? Can we use fiat currency? Yes yes we can. So we don't have
to...we are only using the same technology. But if the issuer or the real estate owner does not want to accept cryptos that's totally fine. We can also close the transaction with FIAT only ( government issued currency). Is there a reason that crypto makes it facilitates it more easily more swiftly? Yes. So if everything is then on blockchain infrastructure and all payments are also handled in cryptocurrencies then we can really...
the whole transaction can benefit from the technology itself and everything can be automated. If we include fiat then we also we need a bank account we need the interaction the API integration with the banks again. So if everything is on blockchain it makes it easier but it's not it's not a necessity. So Alex, you're a lawyer by profession so this must be a very interesting perspective from which to approach the the integration of these technologies into the new way of doing things. So interestingly, we don't need new legislation for what we do. We can apply existing capital market laws. Tokenization just provides a new mechanism of closing transactions.
I see. And so bearing in mind the wariness, the resistance that so many people still have to these technologies actually where do you source your clients from? Interestingly again, we don't need to find them. They're finding us. So everything when it comes to sales is inbound and we are getting almost on a daily base request from potential issues. And when you speak to those those people who approach you those investors, these institutions, these developers, what is it that they say to you that's made them want to embark upon this process? I mean most of them are are interested in how it works and testing it out. We have a few like major real development companies we're working with. A lot of them kind of in the background. Like it's not public. It's private projects. They want to test it out. Some of them still
have fear of reputational damage because they don't know how it works. But they're curious. Do you find that the people who are coming to you are already knowledgeable about how it works or are they really very very green and they're coming out of curiosity? Both. So the majority already looked into the topic before. Yes so what is it that actually makes this this idea of tokenization so applicable to real estate? Liquidity is main topic because you can provide liquidity in a market which is by definition un-liquid. And also like when it comes to secondary. I take the example of crowdfunding.
When it comes to democratization of real estate investment , if I invest into a crowdfunding project today I give a loan, and i'm stuck to that loan for four five six years whatever the term is. But, when I invest into a token in a tokenized transaction I have a secondary market .I can sell my tokens. I can trade them on platforms. So this is completely new yeah. And that that's perhaps what differentiates this from something like fractional ownership if you like Yes and also with tokenization it's not like uh one legal structure you need to fit in. We can be completely creative
in structuring the products for the clients. Where do you see the future of tokenization going? Six months ago you were at a major convention in the United States about tokenization of real estate. Tell us a bit about that what was the the feeling the vibe the the atmosphere there around this? It was like last September; it was in Austin Texas by one of our clients. A US real estate fund and they tokenized the fund.
If you today invest into a real estate fund which is not listed on an exchange then you're kind of stuck to the investment for a certain amount of time. If you tokenize these limited partnership shares you can also create liquidity. You can create a secondary market for that. He put together this blockchain real estate summit in Austin Texas and we were the only Europeans there because it was still a time of travel restrictions back then But from the whole of the US and then also Canada , real estate professionals and investors came there, trying to understand how they can benefit from blockchain technology in the real estate sector.
So the interest is huge! Is the interest sort of inspired or enhanced by FOMO, what we call FOMO, the fear of missing out? So tokenization is not a hype. It's not like we had this ICO hype and now like NFTs, whatsoever. Tokenization of for example real estate um we are targeting the biggest available market and this is something which takes time and everyone is looking into that but like the transition within these organizations if you take like big investment banks or institutional investors it's just like it's not something they can easily um just switch a button and then they can accept crypto. So the two biggest challenges what we see are education like yeah what is the wallet? What is the token? Why do I need it? What's the benefit of it? And the second is technical integration. For example, when we talk to asset managers or wealth managers for our products and the projects they say "yeah I like the product, project. I would invest into that but my asset management system is currently not capable of investing into tokens. So this technical transition this also needs time and this is like the example I gave before. Like the trader on the stock
exchange in the 90s, having its fax machine and it just took time that everything was digitalized. Yes, I mean it's fascinating isn't it because we when i think about what we've known of the internet, you know, initially the internet, Web 1, I think they would call it, would have been just something where you would would read online. And then comes along Web 2 where you can interact so far as you can send and receive and Google. But Web 3 , which is really for most people , we're still on the brink of it. The Metaverse is an interactive phenomenon within which our lives can be played out in so many different ways and that's really exciting and certainly very applicable to real estate. I mean, I wrote an article a few days ago and it stated that like the Metaverse, or Web 3 solutions, are developing solutions without having a problem at the moment.
So I think it's highly interesting that it's possible there but the need is not there. In my opinion yeah. So I can buy real estate in the Metaverse yes yes i can yeah but if you there was the second life game or it still is on like 15 years ago already. They could do the same. But there is no need for it, but there will be and actually those people who are involved in it now are going to be very pleased with themselves in 10 20 years time when they look back and realize or everybody else looks back and realizes that your crazy cousin who was talking about blockchain and crypto and the Metaverse actually was at the forefront of something very very exciting. So finally, if I decide to tokenize my apartment and i want to sell it to you it's really possible for me to directly send you my blockchain address representing the token of my apartment, and not use any intermediaries. In theory yes. The challenge we face in particular
in highly- developed countries like all countries in the European Union, is that most countries have a very good land registry. So we need to make this um we need .....so once blockchain also and technology applies to those authorities, or like land registers are on blockchain, then it's an easy easy move. As of today we need we
developed some workarounds some some structures to to avoid registering with the land registry. In a legal way? In a legal capacity so at the moment we work um with for example participation rights where the buyer the investor has the same commercial interest like the physical owner, like a profit or revenue but he's not registered yet. So if I sell you my apartment, it would it be like me sending you a bit of bitcoin from my wallet. I could literally send you the ledger, the code, and I don't have to go and see the notary upstairs? I can do it like that and it's it's a legal deal. Fabulous. Okay, so one day I may well be redundant. I might not have a job anymore so I think I'd better learn more about the Metaverse. So Alex, thank you so much for coming today. It's been really interesting to talk with you and
there's no question that we're going to be hearing more about tokenization, about blockchain, and of course about cryptocurrency in the years to come undoubtedly. And it's something that perhaps you feel at the moment isn't for you. But I can guarantee that you will learn more about it because inevitably we will have to. If you're interested in finding out about tokenization in any form, perhaps you have a real estate project, a development, that you would like to think about using this form of technology to enhance then please do contact me, Mrs Jones from Jones In Marbella, or of course better still get in touch with Alex direct that's Black Manta Capital Partners and the link to his website will be in the bio of this video it's been a pleasure speaking with Alex today and until the next time. Thank you.
2022-06-22