In this regular feature, we highlight innovative things that our clients are doing. This edition spotlights Building Block Management (BBM), a US-based company leveraging blockchain technology for Real Estate Investment Trusts (REIT). REITs allow investors to diversify their real estate holdings by purchasing shares of a portfolio of revenue-generating real estate. We sat down with CEO Simon Enwia to learn more about REITs, his vision for BBM, and what inspired him to tokenize REIT portfolios.
Building Block Management (BBM) is the parent company of Building Block Technology (BBT) and Building Block REIT (BBR).
Tell me about Building Block Management (BBM). What got you interested in the blockchain industry?
Our team became captivated by blockchain during 2017 when the crypto bubble was forming. People kept encouraging me to invest in crypto, but when I did my own research I found a few red flags—the first being untested exchanges. The market itself seemed to circumvent regulation and compliance, especially in the United States. ICOs were creating little real value, and scams were spreading like wildfire. I kept thinking this was not something I could invest in; the overall market was just not right.
I continued to do more research, which led me to discover the real value in blockchain technology. Building Block Management (BBM) came out of that. We decided to use digital tokens in place of traditional equity to reduce market friction and make the process more efficient than traditional equity.
With the scalability of blockchain technology, we saw that we could tokenize portfolios and tie real assets to each token. BBM uses blockchain technology to provide stability and third party checks where there were none before in the crypto space. BBM REIT represents a new platform and a new process in trading real estate.
So BBM is the management and technology company. Does BBM plan to operate a REIT?
Building Block Technology (BBT) is a software company developing blockchain technology specific to the needs of REITs seeking to tokenize ownership. BBM will sponsor its own REIT—Building Block REIT—that will serve as the testing ground for BBT’s initial tokenization module and for use cases beyond tokenization to improve REIT operations and transparency.
There seems to be a trend of public REITs outpacing Private REITs. Since BBM will prove its model through a public REIT, you must see some advantages to being a public REIT. What are they?
In the past few years, you may have seen mergers and acquisitions among REITs. There are now fewer private REITs overall due to new legislation requiring greater transparency for investors. Public REIT models provide more transparency and an increased amount of liquidity compared to private REIT models.
The advantage of a public REIT is that there is a low barrier to entry, and the cost is lower than a private REIT. Westfield Mall, for example, is a public REIT. You could go to your broker and ask to buy Westfield stock. A private REIT is not only expensive, but the investor must be an accredited investor, resulting in transaction times for buying or selling shares of up to six months.
What BBM provides will not drastically change the public REIT. It will, however, drastically change private and nonpublic REITs. Essentially BBM will make private and nonpublic REITs lower-cost and the blockchain technology will provide more options and more voting rights to the investor. Blockchain will break down barriers for investors between private and public REITs because of this technology.
We can provide investors with more options. Investors will still need to be accredited to invest in private REITs, but buying and selling will take less time using our technology.
There has been word that BBM will be branching out into an UPREIT. What is an UPREIT and what benefits does it provide?
An UPREIT is a group of investors who take property and turn it into a partnership for 1:1 exchange at anytime. This provides the person who holds the portfolio an increased amount of liquidity. Through the UPREIT process, BBR can expand its property portfolio by exchanging tokens for buildings in addition to buying select properties that meet our investment criteria. The net result will be a known portfolio of properties in BB REIT rather than a blind pool of yet-to-be-identified properties.
What geographic locations will you look to invest in?
At this time, BBR is looking for multi-family and office buildings in the Midwest, specifically in Chicago.
How long until BBM is built out? And when does the REIT begin?
BBM outside counsel Convex Legal has filed the required documents with the Securities and Exchange Commission (SEC) and we are raising a Reg D seed round. As we move from the current demo of our tokenization solution we will be seeking to raise additional capital in a series A for BBM and BBT that will fuel growth and the launch of Building Block REIT in 2019.
Who are strategic partners you would like to work with?
Right now, we are lucky to work with great companies in the Midwest such as Chicago Blockchain Project. We are now searching out strategic partnerships with project management software companies to enable better connections amongst our target audience of users. Building Block REIT will serve as a beta test of our tokenization platform, and we will be offering special incentives to the first few REITs who elect to use the BBT platform.
How can people contact your team?
One of the best ways to contact our team would be to go on our website, https://www.buildingblockreit.com, to sign up for email alerts. We also publish our white papers publicly on our website. The website does a great job outlining our team and timeline. If you are an accredited investor interested in Reg D, you should email us at email@example.com to request a demo.