Globalising the REIT

Blockchain, one of the most disruptive forces to invade many an industry in recent years, is finding its way into more mainstream applications. The electronic ledger technology is particularly seeing practical use in real estate, where it can potentially change business practices; for instance, closing out deals, including the transfer of title deeds, may no longer require human intervention.

A UAE-based entrepreneur is taking advantage of existing blockchain-powered applications such as cryptocurrencies to offer more relevant services to real estate investors. Ali Tumbi, whose business interests include the real estate firm Aqua Properties, has established a new company, Global REIT, the first blockchain-based Sharia-compliant real estate investment trust.

By merging blockchain with REIT, the company says it is able to mitigate some of the risks of cryptocurrency by rooting its income in property and delivering more stable returns.

“We saw a gap in the crypto market for an asset-backed token that provides steady returns,” says Tumbi. “We also saw a gap in the real estate market for a truly geographically diversified REIT product, something that is only possible with blockchain.

“In the crypto world, daily swings of 10 per cent are a norm. So in a portfolio of Dh100,000 or Dh1 million, it’s important to diversify and peg back to the real world. You need an option that will offer stable returns and isn’t going to swing every day.”

Global REIT has raised around $14 million (Dh51 million) from a recent initial coin offering. The company says it will invest in the Middle East and other lucrative markets such as the UK.

While the REIT model is already well established internationally, with a combined global market capitalisation of more than $1 trillion, the company points out that traditional REIT offerings are also hindered by regulatory jurisdictional dependence, financial barriers to investment and distributional and legislative processes.

“By offering cryptocurrency instead of shares, Global REIT can acquire properties in any jurisdiction, thus hedging the geographical risk for their investors,” the company says. “With a minimum investment of $100, Global REIT is enabling more potential investors to benefit from investing in real estate, thus effectively opening up the market cap further.”

Global REIT says it will invest in diverse asset types, including residential, hotels, shopping malls, commercial property, hospitals and warehouses, spread out geographically. The first asset acquired by the firm is a $75-million hotel, Mysk by Shaza, on the Palm Jumeirah.

What is Global REIT?

Global REIT is blockchain-based REIT. It offers investors exposure to global real estate markets without the necessity of acquiring an entire property. By merging REIT with blockchain technology, Global REIT is able to solve some of the risks of cryptocurrency by rooting its income in the real world, thus offering investors stable income.

Who’s the target market?

This service is for crypto investors looking for stable dividends on a monthly basis and seeking to invest in real estate assets using cryptocurrencies. It also targets real estate asset holders looking to exit into a liquid market in the crypto domain. REITs can also use the platform to take advantage of an already established blockchain framework to enter the crypto domain.

What type of assets will it invest in?

Global REITwill invest in a diverse portfolio of types, class and geographical location of assets. This will include, but not be limited to, hotels, shopping malls, residential and commercial property, hospitals and warehouses.

What type of returns can investors expect?

Global REIT offers dual utility tokens – Grem and Gret in a 25-75 split. Globally tradable, Grem allows investors to partake directly in the Global REIT fund manager dividends, similar to traditional REITs. Fully tradable on all token exchange platforms, Gret unlocks rapid, simpler, cheaper and more secure trading than traditional REITs. Income of Grem token holders will initially start at 2 per cent of the asset under management and reduce by 0.25 per cent over the first three years, stabilising at 1.25 per cent thereon. Income of Gret token holders will be a stable 8 per cent per year on its first acquired asset.

What’s the benefit of integrating REIT with blockchain?

Global REIT works on the same mechanism as a traditional REIT, but with added benefits not offered by traditional REITs such as participation in the fund management income and monthly and instantaneous dividends.