NYCREC — investment in New York Real Estate through a regulated securities token (2022)

New York City real estate is known as a market, for being historically a playground for the wealthy. Indeed, housing prices especially in Manhattan have risen exponentially over the past decades. One of the most coveted real estate markets worldwide, New York City has largely been unhinged by economic turmoil that has taken place periodically elsewere. Multiple factors such as proximity to global trading hubs and plain opulence have turned New York City real estate as a hedge and a safe haven as an investment. At the same time, the high costs of entry and opaqueness of the market have made investing inaccessible to the greater public. In the contemporary market, REIT’s, or Real Estate Investment Trusts, have made investing in real estate in the most coveted markets accessible for retail investors, and within the past few decades they’ve had quite a successful track record.

Important word: REIT, Real Estate Investment Trust. The trust offers shares of ownership in a real estate portfolio. *From now on I’ll use the abbreviation when referring to the subject.

NYCREC platform introduces a regulated security offering on the Ethereum blockchain. The platform itself is essentially a REIT, with focus specifically on real estate in New York City as the initial market. The owners of NYCREC’s native token may earn dividends, paid regularly from the REIT’s proceeds, which may include occupancy, sales revenue, acquisitions, or dispositions, proportionally to their investment.

The investors are intended to be paid with dividends periodically in Ethereum airdrops.

The NYCREC platform itself will be governed like a traditional REIT, through an investment committee, which goes through relevant, quantifiable data regarding possible investments by hand. At this point, implementation of an AI to crunch through the numbers is still a questionmark. In fact, an AI isn’t mentioned in the whitepaper or the roadmap. The REIT will therefore be expected to be run as an investment trust in the full meaning of the term. The strengths of NYRCREC however do include access to proprietary data and private transactions, and trading is intended to be based upon proven investment strategies. This could be a significant advantage.

Through the NYCREC token, investors worldwide have an access to a portfolio of New York City real estate, backed by tangible assets in a portfolio of securitized real estate holdings. What particularly makes NYCREC unique as a REIT as well as in the blockchain space, is that the token provides international investors a seamless access to the local real estate market. An investor may simply buy NYCREC tokens, and start earning dividends on their investment right away. This is a significant advantage. Today, international investors entering the market are subjected to a considerable volume of bureaucracy and paperwork, even before they begin their tedious research on possible investment opportunities. A regulated security in the form of a token therefore provides much-needed additional liquidity for both buyers and sellers, potentially improving market conditions overall. It may also be speculated that a REIT would increase occupancy in particular categories of investment, such as condominiums, or other assets that are used mainly for speculative purposes today.

NYCREC is a regulated security token, defined as a Reg S security offering. The token itself is an asset-backed cryptocurrency, tied to a fraction of a portfolio of assets composed of real estate or assets related to real estate or other assets in or near New York City. The dividends associated with the NYCREC token are calculated as though the security were a traditional REIT, therefore the investor has to count on the team for making the correct decisions in the market. Although in theory, dividends could be automated into a smart contract, the team has chosen a traditional approach for time being. The team builds their business model on acquisition of underperforming assets with growth potential through the team’s business networks. This is very typical of traditional REIT’s.

What’s noteworthy is that the REIT intends to purchase property in fiat, therefore having to exchange the cryptocurrency in order to access the market. I certainly hope that this is going to change, but it’s still a reality that most propertyowners transact in fiat.

Expansion to other cities around the world is planned to take place, once the project makes inroads in New York City real estate market. The target according to the team is to expand in “major gateway cities” and establish a presence in the local market. After having built somewhat global platform, the project is planning to introduce a collateral blockchain for real estate and other assets.

Roadmap presented by NYCREC seems like it has been laid out by a team of professionals. It has no gimmicks, and it runs like a standard REIT, except that the source of funds is the cryptocurrency market. In a nutshell, the platform first intends to raise funds from an ICO, liquidate the funds and discover favourable property. Then the REIT runs a repeatable process of first building a strategy for cashflow, purchasing property, generating revenue, stabilization of revenue, and finally sell the property or refinance it. The token holders are paid dividends proportionally to their investments.

What’s noteworthy regarding future developments, is that the NYCREC -project is seeking to establish a technical prototype of a collateral -backed standalone blockchain. If this project performs well as a governance structure, and the technical specifications allow the blockchain to be deployed on mainnet satisfying the technical requirements laid out in the development plan, NYCREC might become a pioneer in the field of securities tokens.

The blockchain is supposed to run on a hierarchical infrastructure composed of standard full nodes and masternodes, on a proof-of-validity specification. These nodes would run as the network infrastructure, with rights to process transactions within the network. Token issuance and governance functions would only be available for validated issuer nodes. These nodes would be the ones representing the legal entities entrusted with powers to create and issue tokens into the network. These nodes would also be the ones subjected to verification, auditing and tracking. The technology behind the blockchain is planned to be built upon Stellar and Quorum blockchains.

The ICO is built to reflect a large-scale venture. The ICO has a goal of USD 100 million, where 90–95% is allocated directly to purchasing property, and 5–10% in administrative, legal and operational costs, in total.

The token allocation is a total of 1'750'000'000 tokens. 60% of the tokens is allocated in pre-sale, 30% in reserve, 5% in treasury and 5% for the team and the founders.

My thoughts

The subject is fundamentally new. The prospect is ambitious and the goal set by the project gives the sensation of an evolutionary step in asset-backed securities. I get the feeling that real estate were a conscious choice of field and there were pressure to compete in the market, because a similar portfolio could be built with asset-backed tokens upon any asset class in the market. Stocks, bonds, debt obligations, commodities or trade agreements could just as well represent the customer’s portfolio. Real estate is conservative. That’s why the project seems like something groundbreaking.

I wish that the technical development would include more automation and possibly an AI for calculation of dividends, assessing market data and so on, but I believe that this would be a natural next step anyway. In general sense, the technologies chosen for the infrastructure are competitive.

The project has a clear first-mover advantage. Laid out well, it could herald a new era in investing in real assets.

Website: https://nycrec.io/

Whitepaper: https://nycrec.io/wp-content/uploads/2018/08/NYCREC-Whitepaper-Finalized-Compressed.pdf

My Bounty0x username is starwalkerz

This article was created in exchange for a potential token reward through Bounty0x

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