When it comes to big real estate purchases, the buyer is king. Buying a commercial real estate building is not like buying a single family residence. The lending generally requires much more scrutiny and equity down payment. Finding a qualified and interested buyer requires time and effort. This effort results in a lot of costs for the Buyer. “Pursuit cost for acquisitions can be very expensive annually. The average major CRE investor spends $400k annually on pursuit costs,” Edward Nwokedi, Executive Director of Cushman & Wakefield’s Multifamily Advisory Group and founder of RedSwan.io. He thinks that a network of great buyers could be the way for Buyers to cut their cost substantially.
Edward noticed a preference from his sellers to find the best buyers, “Sellers realize visibility to the right audience gets the best results. While openly broadcasted listings have been common practice, recent activity shows that buyers don’t like the competitive and expensive process of sealed bidding.” So, he created RedSwan as a way to give high net worth buyers exclusive access to off-market listings. Members will be able to buy the properties direct in a peer to peer network. The network will be verified and run on a distributed ledger protocol platform called Hashgraph.
“If you think about the blockchain being a chain of blocks, one after the other in chronological order, Hashgraph can be seen as multiple avenues that are webbed together by gossip. ‘Gossip’ is when one computer makes a transaction, then randomly tells two other computers.
Those two computers will tell four other computers, and it exponentially increases until all computers on the network know about a transaction. The messages, or hashes, that are sent by the ‘gossip’ can be compressed to only 1 or 2 bytes big.”
The governance behind the technology is the Hedera Hashgraph council. This group will consist of 39 organizations from a variety of industries that have the ability to elect a Governing Board. This board, much like a board of directors for a non-profit, is bestowed the responsibility of keeping the spirit of decentralization. The Hedera Hashgraph organization recently raised $100 million with a valuation of $6 billion so it looks like quite a few people see a lot of potential in the idea of elected official overseeing the decentralization of a ledger.
Using the Hashgraph technology will not only allow the platform to have complete transparency for the documentation of each deal, it will also create fractional ownership opportunities. Even the ultra wealthy understand the importance of diversification and the power of being able to buy into a property without having to purchase one hundred percent of the asset. Fractional ownership of security tokens gives them the ability to spread their investment dollars across a larger number of investments. These security tokens can also be able to be sold to others in the network, creating the liquidity that is missing in many large real estate purchases.
The network that Edward wants to create with RedSwan will be valuable for more than just access to deals. It would streamline the compliance necessary in dealing with investors from other parts of the world. Edward also envisions his members having access to internetwork communication, a high-end event series, and discounts on luxury products as the platform grows.
In order to do this he has to convince these top tier buyers and investors that they will be able to gain exclusive access to deals because of their membership. This shouldn’t be hard as most sellers would jump at the idea of having only interested parties looking at their listing. Every broker knows that every deal comes with a long line of “tire kickers.” One of the oldest industry sayings is “buyers are liars.” But now, with an exclusive network like RedSwan and a verified source of financial truth like Hashgraph, buyers will not have the ability to lie about their situations and hopefully deals will happen much more efficiently.