The developer of a London residential project will try to raise up to £140 million (US$167 million) by tokenizing the property, the first tokenization of a building to be undertaken in central London. Hong Kong-based Knight Dragon is the developer of the project, saying in a press release the tokens would give investors the right to profits from Building Four, a 191-unit block that’s fully leased.
Knight Dragon will sell 100,000 digital tokens, called KDB4, initially valued at £1,400 (US$1,670) apiece. Token owners will be entitled to 80 percent of profits from the building, meaning the net rental income generated from the residential scheme. The developer said if the rental income goes up, the token value will likely go up, and vice-a-versa.
The announcement of another huge real estate tokenization project is excellent news for investors interested in the new practice. Less than 1 percent of real estate market capitalization is tradeable on a national exchange, according to Sohail Hassan, Co-Founder and Managing Partner at MarketSpace Capital. Potential widescale real estate tokenization could significantly increase market participation in a historically illiquid industry. Once real estate firms and investors overcome notable obstacles like lack of familiarity and regulatory clarity, tokenization could be gain popularity as a way to invest in commercial real estate. If these projects run into problems, though, it might scare both partners and investors away from tokenized real estate.