New Research Suggests Digital Securitization Facilitates Greater Real Estate Investment
December 10, 2019
The whitepaper, developed in collaboration with Securitize, Deloitte Tohmatsu Group, and the JSTA, explains how foreign direct investment in Japan’s real estate sector would benefit from digital securities.
TOKYO, JAPAN, Dec 10, 2019 — Japan’s private real estate sector presents a strong use case for asset-backed security tokens (ABST) and blockchain technology, according to a whitepaper issued by Deloitte Tohmatsu Group, The Japan Security Token Association (JSTA), and Securitize, the trusted global solution for creating and managing compliant security tokens on the blockchain.
The whitepaper, titled “Security Tokens: Improving Real Estate Investment in Japan” provides a cost-benefit analysis for using ABSTs to exchange value between transaction parties in Japan’s ¥17.7T (US$160B) real estate market. It follows recent news that Tokyo-based property developer, Lead Real Estate, is developing accommodation for the 2020 Summer Olympics using funds raised through security tokens created and managed by Securitize’s platform. Securitize also recently secured US$14M in funding from major backers including KDDI, Mitsui Fudosan, MUFG Innovation Partners, Nomura Holdings, and Santander InnoVentures.
“Our research strongly suggests that security tokens can help solve many of the existing pain points in today’s Japanese real estate market thereby bringing new capital and efficiencies to one of the world’s largest and most desirable markets,” said Carlos Domingo, Co-Founder and CEO of Securitize. “Our recent acquisition of the successful Japan-based blockchain company, BUIDL, means Securitize now has a very strong local team to develop security token applications for the Japanese real estate market."
Security tokens offer exposure to real asset classes, providing a level of transparency that helps financiers with price discovery and calibrating better risk-return profiles on their investments. Blockchain also provides real-time visibility into property data such as land title, capitalization, occupancy rates, and tenant history. This information, which is typically scattered across multiple organizations and in different formats, can be standardized using distributed ledger technology.
“By providing a standardized framework for reviewing and tracking traditionally illiquid assets such as real estate, security tokens can reduce analysis and search costs while creating a more diverse and customized investment product,” Domingo added.
According to Jones Lang LaSalle (JLL), prime office buildings in Tokyo had an average yield gap of 2.9% in 2019, higher than London (2.5%) and New York (1.25%). Japan’s real estate sector is also operating in an ultra-low interest rate environment, which stands to attract new potential investors.
“Inbound investment in the domestic real estate market has declined by more than 2 trillion yen compared to the previous year, but the conversion of conventional real estate securities into asset-backed tokens increases the efficiency and transparency of transactions. Transactions across a wide range of borders can be realized,” says JSTA's Co-President, Tsuyoshi Masuda.
JLL’s 2018 “Global Real Estate Transparency Index” found that real estate investors gravitate to markets where information is more readily available. Almost 70% of direct real estate investment and nearly three-quarters of cross-border investment are currently allocated to ‘highly transparent’ city destinations around the world.
To institutionalize digital securitization requires the creation of strong international standards, best practices, and credible infrastructure. Smart contracts, computer protocols that facilitate, verify, or enforce the terms of a contract, are one method through which this is achieved.
Tokenization’s potential to transform the movement of value and securities between parties across capital markets is further validated by Securitize’s own progress. Securitize’s DS Protocol, which compliantly manages secondary trading and corporate actions for digital securities, currently has the highest adoption rate in the industry.
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Securitize delivers trusted global solutions for creating and managing compliant digital securities. The Securitize compliance platform and protocol provide a proven, full-stack solution for issuing and managing digital securities (security tokens). Securitize’s innovative DS Protocol has the highest adoption rate in the industry and enables seamless, fully compliant trading across multiple markets simultaneously. Multiple Securitize-powered digital securities are already trading globally on public marketplaces with many more in the pipeline. For more information, please visit www.securitize.io.
About Deloitte Tohmatsu Group
Deloitte Tohmatsu Group (Deloitte Japan) is a collective term that refers to Deloitte Tohmatsu LLC, which is the Member of Deloitte Asia Pacific Limited and of the Deloitte Network in Japan, and firms affiliated with Deloitte Tohmatsu LLC that include Deloitte Touche Tohmatsu LLC, Deloitte Tohmatsu Consulting LLC, Deloitte Tohmatsu Financial Advisory LLC, Deloitte Tohmatsu Tax Co., DT Legal Japan, and Deloitte Tohmatsu Corporate Solutions LLC. Deloitte Tohmatsu Group is known as one of the largest professional services groups in Japan. Through the firms in the Group, Deloitte Tohmatsu Group provides audit & assurance, risk advisory, consulting, financial advisory, tax, legal and related services in accordance with applicable laws and regulations. With about more than 10,000 professionals in nearly 40 cities throughout Japan, Deloitte Tohmatsu Group serves a number of clients including multinational enterprises and major Japanese businesses. For more information, please visit the Group’s website at www.deloitte.com/jp/en.
The Japan Security Token Association (JSTA) runs the largest security token community in Japan, in strategic partnership with Securitize, Inc and supported by strong corporate members, including Deloitte Tohmatsu Consulting LLC, and individual professionals. Closely discussing with the local regulatory authorities and financial institutions, JSTA contributes to implementation of security token scheme to the Japanese securitization market, in practical business manners. And at the same time, JSTA drives enlightenment and dissemination about the significant potential of security token to the market. For more information, visit https://securitytoken.or.jp/en/.