Moderator Ms Hannah Jeong, Head of Valuation and Advisory Services at Colliers, started off the webinar with a thorough introduction to real estate tokenisation.

Traditionally, real estate is an illiquid asset type and takes a long time for investors to realise their capital appreciations. The transaction process may also incur high costs. With tokenisation and fractionalisation, as Jeong suggested, real estate assets are more liquid and allow investors with more flexibility as investment hurdles are being lowered effectively. Other benefits, including enhanced operational efficiency, reduced transaction settlement time and greater data transparency, are to be expected as well.

She further discussed key components of the tokenisation process, namely private blockchain and smart contracts. Being adopted at major institutional levels, private blockchain requires certain forms of identification and authorisation, and is faster and less energy-intensive comparing to its public counterparts. With Know Your Customer (KYC) being conducted beforehand, smart contracts are more time-saving, cost-effective, safer and more accurate, which subsequently enables the instant trading of real estate asset tokens.

The lifecycle of real estate tokenisation is very similar to public REITs/IPOs in the market, suggested by Jeong. As a first step, issuers and/or property owners need to go through fund and deal structuring to make it be appealing to the market. Then the issuers can proceed with digitisation to complete the tokenisation procedure. Once the tokens are being distributed to the investors, the post-tokenisation management would be automated, which would be fully utilised in secondary market trading.

In terms of the differences between Security Token Offerings (STOs) and REITs, Jeong pointed the major distinction between the two is that STOs are currently limited to institutional investors and sophisticated investors. Meanwhile, STOs may face less scrutiny and red-tapes compared to publicly traded REITs, which subsequently makes them more flexible and efficient; trading STOs also reduce the cost of trading as “the middle-man” is practically removed.

Jeong highlighted that as STOs are rather new concepts, the regulatory framework is still unclear in most countries. Although tokenisation is supposed to address real estate assets’ illiquid issues, due to the current market size, STOs are still facing illiquidity issues. However, Jeong is optimistic about the future potentials of the tokenisation of real assets and suggested that the first STO product would soon be seen in the market in either Singapore or Hong Kong.

He further added that even though retail investors are being excluded from the trading of STOs, the liquidity shall not be a major concern as there is still huge potential within the pool of sophisticated investors in Singapore.

From an investor’s perspective, Mr Julian Kwan, CEO at InvestaX argued that instead of the tokenisation and offering, deal structuring with good strategic thinking plays a more critical role.

“One of the fundamental differences and value propositions… from real estate shares respective, [it is] the matter of what you can do with these shares now”, said Kwan. Comparing to the traditional ways, through tokenisation and STOs, issuers may reach a wider range of markets while investors can take more proactive actions with the fractions of assets they hold.

Now the infrastructure and platform for tokenisation and STOs are laid, added Kwan, “the tradability of public REITs for real estate married with all the other assets is going to have huge explosion of growth”.

“There is a misconception among people that the use of digital security token is applicable only to certain types of assets.” Said Kwan, “you can tokenise whatever you are going to do. I think it’s more about structuring”.

Nortcliff suggested that as the younger generation of high-net wealth individuals are more tech savvy, tokenisation and distribution through blockchain may be better received, especially through tokenised feeder funds into an existing fund.

He further emphasised the importance of the trustworthiness of fund manager and the respective regulatory regime. “The things that will drive adoption and expansion of [tokenisation] is the quality of investment manager with a track record”, drawing example from his past successful experience, Nortcliff highlighted that the fund was “an institutional manager in an institutional grade regulator regime”.

As one among many other platforms granted Recognised Market Operator (RMO) licence, Poh suggested investors would eventually gravitate towards the exchanges that provide the most value for them. “For issuers, [the value] is that the exchange provides the most investors; and from the investors’ perspective, it is of course what do you have on your exchange.

“It always comes down to price”, he added, “and the very basic requirement in all this is to ensure their money is kept safe… [and the] entire ecosystem is protected”.

Kwan further addressed the misconception regarding the correlation between the quality of token issuance and its underlying securities. Tokens make securities much more functional, but terrible securities would not embedded in good securities just because of the tokens.