David Weild, the former Vice Chairman of the NASDAQ and one of Jointer’s advisors says that “Jointer’s new tokenization approach presents a better solution that has the potential to disrupt the entire real estate industry.”
Manhattan’s iconic Chrysler Building is up for sale, but discovering who the potential buyers remain difficult since the bidding process has closed.
One rumor is that Amazon.com Inc., on the heels of canceling its HQ2 plans in Queens, could buy the 89-year-old skyscraper — or at least sign a massive lease agreement. Even though the e-commerce giant (NASDAQ: AMZN) can afford the tower’s price tag, it hasn’t confirmed plans either way.
I spoke to one bidder — Israeli entrepreneur Jude Regev — and he’s not happy with the way brokerage firm CBRE Group Inc. is managing the sale.
“We are afraid that CBRE Group, in an effort to protect their market cap and commissions, disingenuously presented our offer, rather than working with us,” Regev told me.
Regev, who touts launching five companies and three exits, says he was snubbed by the brokers after his blockchain startup — Jointer.io — placed what he says was a high offer.
“Our fear is based on the fact that a member of our team was told by the lead broker to not even participate from the first place, which is a major disservice to their client,” he added.
CBRE adviser Darcy Stacom is managing the listing on behalf of the sellers, Abu Dhabi Investment Council (ADIC) and New York developer Tishman Speyer. A CBRE spokesperson and Amazon did not respond to inquiries seeking comment.
Below is my discussion with Regev. He explains why the 77-story art deco building is an attractive investment and how a “tokenization approach” can potentially disrupt the real estate industry.
Who’s behind Jointer?
Jointer was founded in 2017 and has raised $2.5 million over two funding rounds to build the technology that allows us to tokenize multi-billion dollar assets like the Chrysler Building. Recently, Jointer won first place for the best startup in the world, earning a $1 million dollar prize during the worldwide competition between 4,000 startups and 196 countries. Jointer’s advisors includes top industry professionals including Nobel Prize Winners, the Former Chairman of the SEC, former vice chairman of the NASDAQ and “Father of the JOBS Act”, the founder of Visa Inc., and the former CFO of Yahoo.
What does it mean to tokenize a building?
Currently, tokenization means issuing security tokens to represent an income stream or equity in a property. Most do not understand the limitations, the risks, and the exposure from a regulatory and liquidity perspective. The current tokenization model is very similar — and in some ways even worse — than the old crowdfunding model. The only innovation was replacing papers with digital notes to instantly verify ownership.
Initially, Jointer’s platform was created around this tokenization model. After recognizing the major issues, Jointer created a new tokenization model that completely removes exposure to specific property investment. Investors purchase debt tokens that follow the performance of all the commercial real estate in the US while presenting instant liquidity without a secondary market. We also lower the barrier to entry by offering investments for as little as $1 without a lock-up period.
Why should property owners consider tokenization?
When it comes to tokenizing a property, other regular tokenization options in the market offer high-cost solutions without removing regulatory liability for the fundraising and ongoing token governance. Jointer presents property owners with a new tokenization model that allows them to instantly unlock up to 100 percent of their equity at zero cost while continuing to earn profits from the property.
Jointer’s new tokenization model works in a way that allows Jointer to borrow money from the public while allowing the public to receive returns based on an index that follows the performance of the entire US commercial real estate market. The index is currently generating an average of 20 percent returns a year, all with zero specific property exposure.
Borrowed funds are in turn used to help property owners receive capital for the locked equity in their property. The income streams from all the properties in the world that Jointer tokenizes go to the main reserve which is controlled by a smart contract and can be redeemed by tokens holders.
This means investors not only get high returns with zero exposure to specific property risks, they also have cross collateral from unlimited property income streams as well.
What kind of returns does Jointer offer?
To put things in proportion, regular lenders like institutional, soft money, or even hard money receive 4 percent to 12 percent returns a year, with no liquidity and limited collateral. Jointer offers up to 20 percent returns a year, liquidity, and cross collateral.
We believe that there is no reason why lenders can’t remain lenders and simply reduce their risk and for the first time, gain returns like owners. This method is very scalable because Jointer is not obligated to purchase the property upfront in order to tokenize it. Therefore, the process is capable to be replicated to tokenize an unlimited number of properties simultaneously.
Why the Chrysler Building?
The Chrysler building has high vacancy and negative cash flow. Any traditional offer may leave the current owners with less than what they paid for it. With Jointer’s method, we can leverage this building in a way that the ROI will be much higher, and therefore Jointer’s offer was accordingly high. Also, Jointer’s new tokenization model is designed to help property owners unlock up to 100 percent of their equity in a property. And if the owner chooses to stay as a Principal to manage the property, they are also eligible for asset management fees plus 50 percent from Jointer’s future profits from the property, which can boost the owner’s ROI exponentially.
What’s the status of the Chrysler Building auction?
We submitted our offer knowing that there is a traditional real estate brokerages acting as a centralized power between the seller and potential buyers. This barrier may block any innovation or new concepts that can put their high fees at risk. It was pretty clear to us that conservative brokers may present such offer using traditional criteria such as; a high offer compared to other buyers, lack of traditional track record, no down payment, and no proof of funds. While the right way to present such a strong offer by open-minded broker will be that Jointer invested millions to create a new tokenization model that allows the public to invest in the building without the needs to go to the stock market (like the Empire State Building buyer did and made a lot of money).
Jointer already has 250,000 investment community members that can be leveraged, the owner also can stay in place as Principal and continue earning returns from Jointer profits. Although there is a risk that if the public does not invest, the property will return to the market. Above all, the upside of Jointer’s offer is far greater since it allows the seller to avoid losses.
Did the brokers do their job to help the seller identify the best buyer?
We are afraid that CBRE, in an effort to protect their market cap and commissions, disingenuously presented our offer, rather than working with us. Our fear is based on the fact that a member of our team was told by the lead broker, to not even participate from the first place, which is a major disservice to their client. Who is your competition? The bidding process is closed so we are unsure of a winning bid. We know that our offer was higher than all others, because the broker couldn’t understand how we supported our high valuation when all other traditional buyers couldn’t.
If the Chrysler auction doesn’t work in your favor, will Jointer look to tokenize another NYC property?
Jointer already started to contact a few other iconic properties in New York. But this time we are reaching out to ownership teams directly by sourcing off-market opportunities (when brokers are not yet involved in the process). We believe that if the traditional brokers will not embrace new technologies, and find a way to work with startups like us, they will find themselves in the same position as Blockbuster after Netflix Inc. came to them in the beginning.
The market changes based on new needs and new solutions, driven higher by technology. Big companies are not immune to becoming irrelevant tomorrow. In the end, the only companies that will survive are those that offer the best services to the seller and buyer.
We seek to first empower existing industries and professionals in that industry before we find a way to go around them. Unlike real estate brokers, the loan broker industry adopts our technology and innovation with open minds. So far we have a waiting list of more than 1,000 loan brokers to identify lenders and property owners with over $1B in tokenization potential. We believe that if real estate agents will be more open-minded and celebrate with us, they can find a new way to generate extra commissions by offering our services to previously closed deals while helping owner unlock equity and increase IRR.
David Weild, the former Vice Chairman of the NASDAQ and one of Jointer’s advisors says that “Jointer’s new tokenization approach presents a better solution that has the potential to disrupt the entire real estate industry.”
Original Source By Anthony Noto — Reporter, New York Business Journalist
