{"id":824,"date":"2025-03-04T16:34:18","date_gmt":"2025-03-04T16:34:18","guid":{"rendered":"https:\/\/deepocean.house\/?p=824"},"modified":"2025-03-13T15:00:21","modified_gmt":"2025-03-13T15:00:21","slug":"tokenizacja-w-manhatanie","status":"publish","type":"post","link":"https:\/\/deepocean.house\/en\/tokenizacja-w-manhatanie\/","title":{"rendered":"Tokenization in Manhattan"},"content":{"rendered":"
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Tokenization in Manhattan<\/h1>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Home<\/a><\/span><\/span><\/p>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Tokenization of a luxury Manhattan apartment building - a case study (2021)<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Project background<\/h3>\n

A pioneering project to tokenize a luxury Manhattan apartment building was announced at the end of 2018. It concerned a newly built 12-unit condominium building in the East Village (address: 436 and 442 East 13th Street), known as the \u201cThirteen East + West\u201d project. The total value of this building (the so-called sellout, i.e. the total projected selling price of all units) was estimated at around USD 36 million (Crypto Real Estate | Fluidity | Thirteen East West). The purpose of tokenization was to enable investors to purchase shares in this project in the form of digital tokens secured by real estate, which was to open up the real estate market to a wider group of investors through fractional shares available even for small amounts (New York's $30 Million Housing Development Up for Grabs on Ethereum). The initiative was carried out by the Amirian Group development company in cooperation with the technology companies Fluidity\/AirSwap and the broker-dealer Propellr (later integrated under the Factora brand (Introducing the next level of tokenization of private placement securities \u2013 The Tokenizer) (Propellr)). This project was hailed as the first real estate tokenization of its kind on the New York market and attracted a lot of media attention (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through), heralding a more democratized and decentralized model of real estate investment.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Blockchain and tokenization platform<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The tokenization of the apartment building was carried out on the Ethereum blockchain. Investor shares were recorded as tokens on the Ethereum network via Fluidity's AirSwap platform, which enables the creation and trading of tokens in accordance with securities regulations (New York\u2019s $30 Million Housing Development Up for Grabs on Ethereum<\/a>). Ethereum was chosen because it supports smart contracts, which allow for the automatic enforcement of property rights and the distribution of profits from the rental or sale of apartments in the form of tokens. These tokens were security tokens \u2013 they represented shares in the company owning the property and were therefore fully secured by a physical asset (rights to the property) (Crypto Real Estate | Fluidity | Thirteen East West<\/a>). According to Forbes, it was the first such large real asset in Manhattan digitized on Ethereum (New York's $30 Million Housing Development Up for Grabs on Ethereum).\nTechnically, the structure consisted of creating an LLC that was to take over the project from the developer along with its debt, and then issuing tokens corresponding to the shares in this company. The tokens could be purchased in traditional currency (USD) or in cryptocurrencies, with ownership records automatically registered on the blockchain (Crypto Real Estate | Fluidity | Thirteen East West). This allowed investors \u2013 including smaller investors who met the criteria for accredited investors \u2013 to directly purchase \u201cparts\u201d of the property, which previously required a lot of capital or participation in a REIT fund.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Number and structure of issued tokens<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The tokenization used an innovative financing structure called the \u201cTwo Token Waterfall\u201d (two-token waterfall structure) developed by Factora (formed from the merger of Propellr and Fluidity). Instead of one type of share, the issue was divided into two types of tokens corresponding to different capital layers in the project (Introducing the next level of tokenization of private placement securities \u2013 The Tokenizer):\n\u2022 Senior (debt) token \u2013 senior in the order of satisfaction, reflecting the debt component (loan secured by real estate).\n\u2022 Junior (equity) token \u2013 subordinated, corresponding to equity in the project and entitling to a share in the profits from the sale of apartments after repayment of the debt.\nThis division reflects the full capital structure of the project (the so-called capital stack) in the form of tokens (Introducing the next level of tokenization of private placement securities \u2013 The Tokenizer). According to the available information, the intention was to issue tokens corresponding to a total of approximately USD 25 million of project capital, of which approximately USD 17 million was to be in the form of debt tokens and approximately USD 8 million in the form of equity tokens (). These amounts corresponded to the planned refinancing - ~$17 million is roughly the amount of the existing construction loan, while ~$8 million covered the developer's equity\/preferred equity, which investors were to take over through tokens (Crypto Real Estate | Fluidity | Thirteen East West) ().\nHowever, the exact number of token units (pieces) has not been made public. Industry sources only reported that \u201cthe entire property is represented by an unspecified (unconfirmed) number of tokens on the public blockchain,\u201d with each token representing a fraction of the value of the apartment building ( $30 Million New York Condo Tokenized on Ethereum Blockchain | Bitcoinist.com). In other words, the division could have been very granular (e.g. theoretically 1 token = $1 in value, which would result in ~25 million tokens), but the specific nominal value of the token was not disclosed. This was partly due to regulations \u2013 the offering was a private placement for accredited investors (exempt from full registration thanks to Reg D 506(c)), hence the organizers could not publicly advertise details of the issue such as the price of a single token or the total number (Crypto Real Estate | Fluidity | Thirteen East West). It is worth noting that the minimum investment was set at $25,000 (Crypto Real Estate | Fluidity | Thirteen East West), which indicates an indicative entry threshold for investors and indirectly suggests that a single investor would cover a significant number of tokens corresponding to this amount (or multiples thereof).\nIn total, the tokens represented approximately $25 million in project equity, divided into two tranches (debt and equity). The exact number of tokens issued is not publicly available; it is only known that the issuance was planned to cover a significant portion of the property value (approximately 70%) in the form of digital equity.<\/p><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Name and characteristics of the tokens<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Unlike some high-profile cases (such as the \u201cAspen Coin\u201d for the tokenization of the St. Regis Aspen hotel), the tokens for the Manhattan apartment building did not receive a common marketing name. In documents and statements, they were usually described simply as \u201ctokenized securities\u201d related to the Thirteen East + West project or as the aforementioned tokens of senior and junior class within the Two Token Waterfall model (Introducing the next level of tokenization of private placement securities - The Tokenizer). It can therefore be said that the functional name of the tokens was simply debt and equity interests in the project, recorded on the blockchain.\nEach token corresponded to a membership interest in an LLC holding the project's assets. The debt token gave investors a fixed preferential return (equivalent to interest) - there was mention of a \u201cpreferred return\u201d for investors (Crypto Real Estate | Fluidity | Thirteen East West), which means that token holders had priority in receiving a predetermined profit (e.g. interest rate) from the project's revenues. The equity token, on the other hand, ensured participation in the profits from the sale of apartments after repayment of the debt tokens (i.e. a potentially higher return depending on the sales success of the project). This distribution was intended to reflect the traditional financial instruments - debt and equity - in the form of tokens, so that different investors could choose the risk and return profile (more stable and secure vs. more volatile, but with growth potential) (Introducing the next level of tokenization of private placement securities - The Tokenizer).\nIn practice, the tokens were not listed on a public cryptocurrency exchange, but were made available to eligible investors via a private placement platform (AirSwap\/Propellr). The lack of public trading and the restriction to accredited investors meant that the tokens did not appear under any ticker or symbol on the open market. From the investor's point of view, they were more like digital shares in the Thirteen East + West project, recorded in the Ethereum distributed ledger, than typical cryptocurrencies with their own name.\nIn short, the tokens did not have a separate trade name \u2013 their \u201cname\u201d was de facto their belonging to the project (e.g. 436\/442 E 13th Street project token) and category (debt vs. equity). The term Two Token Waterfall mentioned in the materials refers to the structure of these tokens, not the proper name of each of them (Introducing the next level of tokenization of private placement securities - The Tokenizer). It can therefore be concluded that the naming of the tokens was limited to a descriptive indication of their financial role in the project (debt token and equity token).<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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The amount and course of the token sale<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The token offering was conducted as a private security token offering under SEC Regulation D 506(c), which allowed for public disclosure of the offering, provided that it was sold exclusively to accredited investors. The target amount of capital raised from the sale of tokens was not officially made public in full, but the context of the project financing indicated an amount in the region of ~$25 million (the sum needed to redeem the $16.95 million debt and return the developer's preferential capital) (Crypto Real Estate | Fluidity | Thirteen East West) (). In other words, tokenization was supposed to provide about $25 million in fresh financing, which represented a significant portion of the value of the entire building (about 70% of $36 million).\nIndustry media often reported that the value of the tokenized property was ~$30 million \u2013 this figure is based on conservative estimates or previous valuations before the sale of the apartments was completed (New York's $30 Million Housing Development Up for Grabs on Ethereum). The actual sales potential ($36 million) was slightly higher, but it was not planned to tokenize the full amount - the developer retained part of the stake and the tokens were mainly offered to refinance the project costs.\nThe price of a single token or share was not disclosed to the public. The organizers only indicated a minimum investment threshold of $25,000 (Crypto Real Estate | Fluidity | Thirteen East West), while a detailed valuation of the shares was only available in the offer documentation for potential investors (due to SEC requirements, such information could not be disclosed in the press (Crypto Real Estate | Fluidity | Thirteen East West)). It can be assumed that the valuation of the tokens was calculated in such a way that investors would receive an attractive return with preferential interest rates and a share in the profit when the apartments were sold after the completion of the project.\nWere the tokens actually sold? According to available reports, the offer met with moderate interest and ultimately did not lead to the full public sale of all tokens. In mid-2019, it was reported that the tokenization project had been quietly withdrawn - Fluidity and Propellr had decided not to offer these tokens any further, citing insufficient institutional demand (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through). As Fluidity's co-founder put it, \u201cthe market was too young at the time, there was a lack of appetite from institutional investors\u201d (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through). In other words, despite the initial media hype, the target amount was not raised in the allotted time, resulting in the project being put on hold.\nAs a result, the total amount of tokens sold has not been officially stated because the offer did not successfully reach the full closing phase. If any tokens were sold privately, these details have not been made public. All that can be said is that the plan was to sell tokens for several tens of millions of dollars (around 25 million USD), but publicly available sources do not confirm the finalization of the sale or the final amount raised. The developer may have been able to secure financing through alternative channels or sell the apartments in the traditional way, and the tokenization of this building has primarily become a valuable pilot project for the market.<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Summary<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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The tokenization of the Thirteen East + West apartment building in Manhattan was a groundbreaking attempt to use the Ethereum blockchain to divide the ownership of a highly valued property into digital equity tokens. The project involved the issuance of tokens on the Ethereum blockchain (New York's $30 Million Housing Development Up for Grabs on Ethereum), as part of a structure with two types of tokens (debt and equity) reflecting the full financing structure of the project (Introducing the next level of tokenization of private placement securities \u2013 The Tokenizer). The total value of the tokenized shares was based on the value of the property (~$36 million) and capital requirements (~$25 million) () (Crypto Real Estate | Fluidity | Thirteen East West). The tokens did not have a separate marketing name \u2013 they functioned as digital shares in the project recorded in Ethereum, secured by a physical asset (an apartment building) (Crypto Real Estate | Fluidity | Thirteen East West). The issuance took place in accordance with the regulations (Reg D 506(c)), addressed to accredited investors, with a minimum investment of USD 25,000 (Crypto Real Estate | Fluidity | Thirteen East West).\nFrom an informational perspective, some data (the exact number of tokens issued, the issue price, the final amount raised) has not been made public, due to both legal restrictions and the fact that the project did not enter the full sales phase. Sources agree that it was a pioneering initiative that ultimately failed to meet investors' expectations and was halted before reaching the target financial goal (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through).\nNevertheless, the experiment demonstrated the possibilities and challenges of real estate tokenization. The Ethereum blockchain functioned as an innovative infrastructure for recording ownership rights, and the very concept of dividing real estate worth tens of millions of dollars into small tokens proved its technical feasibility. Challenges arose mainly on the market and regulatory side \u2013 among other things, liquidity and demand for such tokens turned out to be limited at the time (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through).\nTo summarize, the tokenization of a luxury Manhattan apartment building in 2021 (actually started in 2018\/2019) took place on Ethereum, involved the issuance of two classes of tokens with a total value of approximately 25 million USD (with the property valued at ~36 million USD), the tokens corresponded to debt and ownership shares in the project and were physically secured by the property () (Crypto Real Estate | Fluidity | Thirteen East West). The naming of the tokens was purely descriptive (no \u201ccoin\u201d branding), and information on the exact number and price of the tokens was not disclosed to the public due to the private offering nature ( $30 Million New York Condo Tokenized on Ethereum Blockchain | Bitcoinist.com) (Crypto Real Estate | Fluidity | Thirteen East West). The transaction was supposed to demonstrate the potential of tokenization in real estate, but in the end it did not lead to a wide sale of tokens on the market due to limited interest from institutional investors at the time (Propellr and Fluidity's NYC Real Estate Tokenization Deal Falls Through).<\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Sources<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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