Frequently Asked Questions

Real Estate Tokenization

What is digital asset tokenization?

Tokenization describes the process of transforming traditional equity holdings into digital shares. These blockchain based digital "tokens" allow investors to view detailed information about their holdings, and make it possible to buy, sell, and transfer private assets online. Commonly referred to as “digital assets” or “security tokens”, these financial instruments can also be referred to as smart contract, digital securities, digital shares, & more.

Why would someone tokenize Real Estate?

Tokenization revolutionizes the real estate investment process. Vertalo provides a digital platform for General Partners, Investors, & Service Providers to integrate and optimize real estate transactions. Our real estate clients are rethinking ownership structures to allow investors to buy, sell, and transfer their shares online. Vertalo creates a digital experience for investors and enables new online outlets for data management & liquidity.

How can property owners and fund managers benefit from tokenization?

The primary benefits for issuers of digital securities are:

  • Improve investor & data management with digital reporting

  • Create liquidity due to online trading venues & collateralizing digital assets

  • Optimize transactions by integrating directly with service providers

How can real estate investors benefit from tokenization?

The primary benefits for investors in real estate digital assets are:

  • Increased transferability and liquidity on private investments

  • Streamlined process for viewing holdings and analyzing asset performance

  • Increased investment opportunities due to ability to source investments online

How does tokenization provide liquidity for Real Estate Assets?

Creating liquidity on private assets is the end-goal and most exciting value-add of digital securities. Transforming traditional real estate equity into digital assets (security tokens) creates a transferable digital share. This allows investors to buy and sell on the Secondary Market with a wider pool of potential investors. Liquidity can also be achieved by collateralized borrowing against tokenized equities. Tokenization is an additive process, it creates new pathways for liquidity and traditional methods for capital flow are still available.

How is this process legally compliant?

Yes, Vertalo is a registered Transfer Agent and has built a platform that is SEC compliant. Vertalo is customizable and can support any offering structure. Many tokenized investments abide by legal guidelines set forth by the JOBS act, which created regulatory frameworks for retail and accredited participation in exempt offerings under Regulation D, Regulation A+ and Regulation CF in the US. We have seen 506(c) Reg D offerings to be common

Are these deals done in cash or cryptocurrency?

Vertalo is entirely cash based and does not take in capital from investors, the currency flows through the Issuer. Our technology is not related to Bitcoin markets. The underlying blockchain technology is shared with cryptocurrency, but the digital assets created on Vertalo are independent of the prices and network behind Bitcoin and cryptocurrency.

Does Vertalo help me raise money?

Vertalo is a technology service provider and registered as a Transfer Agent. We are not a Broker-Dealer and we do not facilitate or offer fundraising services. The Vertalo technology connects your offering and/or existing equity to a network of Broker-Dealers, Secondary Markets, Lenders, and more. View our Partners pages to learn more.

Do I need approval from my General Partner (GP) to tokenize?

Yes, it is important to understand that the GP (or Issuer) is in full control of how the tokenized equity is governed. Tokenization introduces new capabilities, but all actions must abide by the Operating rules set forth by the GP or Owner. Transfers may or may not need to be approved by the GP before deemed final.

Can you refinance an asset through tokenization?

While tokenization is not the same thing as refinancing, tokenization can be used as an effective alternative to refinancing. In the event a refinance is needed, a tokenization offering could be held to eliminate the existing debt obligation via capital provided by new investors.

Who will be able to buy my tokenized real estate?

Only investors that are accredited and approved by the GP will be able to invest in tokenized real estate. Vertalo is integrated with compliance services to automate the investor background check and whitelisting process. Vertalo integrates KYC (know your customer), AML (anti-money laundering), and Accreditation services so all potential investors are properly verified. This process is done to ensure the online investment practice is fully SEC compliant.

What if I don’t want to bring on limited partners I’ve never met?

No problem! The GP or issuer will have the ability to clearly vet and approve or disapprove of all investors. A limited partner who is not approved by the GP will not be permitted to invest.

Where can I see tokens trading currently in real time?

Vertalo maintains a growing list of trading venues which can be viewed on our Partners page. There are very few active markets for tokenized real estate securities because the technology is very new. Vertalo works with regulated ATS Exchanges services such as tZERO. Vertalo can integrate new trading venues or privatized implementations with our fully customizable API.

Who verifies the integrity of digital deals and assets?

As with a traditional offering, this is the investor's responsibility. The Issuer must provide necessary documentation for asset due diligence. Vertalo provides a digital deal room for asset documentation and information. The addition of a digital asset tokenization does not change the investor requirements. When an asset is available on the open market the amount of real, verifiable info will be factors in asset valuation and interest. An asset with limited info and a non verifiable offering will not be as attractive on the open market.

How long does the process of tokenization take?

The actual process of transformation of ownership into digital shares only takes minutes on the Vertalo platform. We can enable Secondary Market transfers very quickly with a prepared client. We typically see the education & planning to take 2-8 weeks. The tokenization process typically ranges from 1 to 3 months with time varying based offering requirements.

Are there restrictions on when holders can sell a tokenized asset?

Restrictions are based on SEC required lock up periods and Issuer restrictions. Most existing real estate equity can be transferred immediately. For issuance of new equity a lock-up period may be required. If issued under Reg D, there is a one year lockup period on trading. However if strictly tokenizing existing ownership structures with no primary capital raise, there is no lockup restriction. The rules regarding resales are the same for paper assets as they are for digital assets.

What are the costs associated with tokenization?

Cost of tokenization varies based on asset size and requirements. Tokenization is a small cost compared to the fees associated with a typical capital raise or real estate transaction. As such, tokenization is designed to be a very small addition to your asset's total cost of ownership.

How do publicly traded REITs differ from a tokenized asset?

The digital asset model offers many benefits over REITs. The core benefits can be categorized as follows:

  • • Valuation: Direct share ownership trades closer to asset NAV than a REIT

  • • Scope: Tokenizations allows single assets and private issuances to trade

  • • Optimization: Digital processes improve cost efficiency and accessibility

Do I need prior knowledge of ‘blockchain’ to interact with tokenized assets?

No. Vertalo's platform has been built with a user friendly interface similar to that of an online bank account, with a goal of ease and simplicity for the user. With Vertalo no maintenance of wallets, private keys, or anything blockchain related is needed to issue or invest.

Are there more or less complications for an LP vs. a C corp? How about individual assets, like single family homes (SFH)?

The digital nature of the asset does not make a difference here, digital securities can represent ownership in any type of corporate structure.

Vertalo Real Estate (VRE)

As the largest asset class in the world with a combined estimated value of over $228 trillion, investing in Real Estate has many advantages over investing in stocks, bonds or mutual funds. The most notable benefits of investing in Real Estate and Real Estate-based financial products typically include: a predictable cash flow and ability to generate passive income, an improvable asset with the ability to appreciate in value, and an array of benefits surrounding leverage capabilities and tax advantages.

However, Real Estate investment transactions remain frozen in time, conducted in the same manner as they have been since the late 1900’s. Using outdated infrastructure, paper based processes, and multiple third-party intermediaries, the real estate sector has internalized significant structural inefficiencies. These traditional practices create unnecessary friction in transactions, impacting value and liquidity, while market participants have previously had no option but to tolerate the complex regulations and processes associated with real estate investments.

Vertalo’s platform is positioned to modernize real estate transactions and deals by transitioning them into the digital age, making significant improvements in real estate transaction efficiency, cost, security and liquidity. Vertalo is using blockchain-based technology to eliminate the largest inefficiencies associated with real estate capital raising, management and investing.

Founded in 2017, Vertalo is a software company that connects and enables the digital asset economy. Process driven friction in private markets present challenges to illiquidity, speed, record accuracy, and market efficiency. As an SEC-registered transfer agent, Vertalo connects investor and asset data to broker-dealers, custodians, and sources of liquidity, thereby reducing this friction. Vertalo is the data management platform that connects shareholder and issuer data to ecosystem partners via API’s.

In the traditional real estate landscape, Issuers must deal with the complexities of asset and investor management, lengthy ownership transfers, regulatory investor compliance, expensive business operations, maintaining cash and dividend flow, security against fraudulent transactions by bad actors, and an overarching obstacle of liquidity complications. The Vertalo Real Estate (VRE) platform provides a comprehensive solution to each of these areas.

The Vertalo Real Estate (VRE) platform is

  1. Leveraging next generation ledger technology behind a new digital interface to optimize efficiency in investor data & property management
  2. Implementing smart contract technology to expand the capabilities of transactions, improve cash flows, and shorten cycle times
  3. Maintaining bank-grade security & regulatory compliance by employing cryptographically secured decentralized ledger (commonly referred to as blockchain) technology.

The overarching goal through all of these procedural improvements is to drastically increase liquidity in the real estate Industry. This introduction to the Vertalo Real Estate (VRE) platform serves to educate both real estate investors and issuers, establish capabilities, and invite the comment and expansion upon ideas related to the tokenization of real estate assets.

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