$280 Million Ethereum Real Estate Bond Seeks To Recapture The Promise Of The ICO
As the crypto community digests the news that leading firms such as Blockstack and YouNow obtained SEC approval to sell security tokens to retail investors, a German startup announced that it received approval from the German Financial Market Supervisory Authority (BaFin) to distribute the country’s first blockchain-based real estate bond to retail and institutional investors around the world.
The company is called Fundament Group, and yesterday it launched a 250 million euro ($280 million) tokenized bond offering on the Ethereum blockchain backed by commercial real estate investments in major cities across Germany. The token will conform to ERC-20 standards and be interoperable with most major wallets and transferable around the world.
According to reporting from CoinDesk, the token will be backed by five separate construction projects, three in Hamburg, one in Frankfurt and one in the university town of Jena. The portfolio, including residential, commercial and hotel properties, will total more than 680,000 square feet upon completion. The company expects to pay investors an annual dividend between 4-7% each year at the end of July until the year 2033, at which point investors will be reimbursed in full for the nominal amount of their initial purchase. Investors will be able to pay for their shares and receive dividends in fiat or ether. There is an expectation that this payout model could help drive additional demand for the token, as opposed to traditional STOs that may trade at a discount, at least early on, due to illiquid markets.
A Return to the Spirit of the Initial Coin Offering ‘ICO’
What immediately caught my attention about this offering is that unlike many tokenized real estate projects in the market, this is the first made available to individual retail investors without any minimum purchase. In this sense, Fundament’s founders are seeking to recover the “spirit of the ICO," which at its best democratized access to potentially high-yield investments and interesting projects to anyone. Last year due to regulatory pushback around the world, but especially in the U.S., ICOs fell into disrepute and gave way to Security Token Offerings (STOs) that comply with relevant securities regulations. However, STOs disenfranchise a number of would-be investors because they are typically only available to institutional and accredited investors.
I write about blockchain technology with a focus on regulation