A building on Zurich’s most exclusive shopping street has been converted into a blockchain-powered investment following its CHF130 million ($134 million) sale. It is the latest attempt to unlock the value of bricks and mortar using digitally-coded tokens.
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When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
Bahnhofstrasse 52, which houses offices and a Swatch retail outlet, was bought by Zug-based real estate investment firm BrickMarkExternal link on Wednesday. The company has issued digital tokens, underpinned by a bond, which can be bought and eventually traded by investors who want a slice of the building’s rental income and increase in sale value.
BrickMark funded about 20% of the purchase by giving the seller, RFR Holding, a batch of its newly created tokens. This means that RFR Holding retains a stake in the future income of the building.
“There has never been a token-financed transaction of this magnitude,” said BrickMark CEO Stefan Rind in a statementExternal link. “We are implementing what was once no more than a concept in the real estate industry.”
The Bahnhofstrasse buildling is the first of a planned global real estate portfolio that could be worth upwards of CHF1 billion, the company said. BrickMark is accumulating a €50 million cash stockpile from investors but also intends to part-finance further acquisitions with its tokens.
Smart contracts
The tokens are created by drawing up digital “smart” contracts that entitle holders to a share of the portfolio’s financial spoils (they could also result in losses if the properties lose value).
The tokens are created and traded on a blockchain – a digital platform that proponents believe is a much more efficient system than the current paperwork-based method of buying and selling properties. The smart contracts embedded in the tokens can also be custom-made to automatically carry out a range of functions, such as paying dividends and fees.
BrickMark is the latest in a growing list of blockchain companies setting their sights on the real estate market. Last year, a consortium led by blockimmo converted a Swiss building into digital shares and sold a 20% stake to investors over the blockchain.
More recently, Geneva-based company WeCanExternal link tokenized two properties in Portugal in a €11 million deal, which it plans to repeat across other European countries.
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