How to build passive Income and long-term wealth in real estate through REITs, crowdfunding and fractional ownership. Join host Kevin Vandenboss in the Benzinga Real Estate podcast as he discusses passive real estate investments with some of the most successful investors in the industry and shows you step by step how you too can become a lazy landlord.
In this episode of The Real Estate Podcast, Kevin Vandenboss speaks with Andrew Crebar, CEO of HoneyBricks
Kevin Vandenboss
Real Estate Expert at Benzinga
Twitter: https://twitter.com/KevinVandenboss
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Transcription:
Welcome back to Benzinga’s Real Estate podcast. Today we have Andrew Crebar who is the CEO of HoneyBricks
HoneyBricks is a real estate investment platform but it’s quite unique compared to some of the others we’ve talked about before.
Kevin Vandenboss: Andy I would love to hear about how you got into the real estate space and then if you can just go into what HoneyBricks and try to give our listeners just a general overview of what this platform does and what’s so unique about it.
Andrew Crebar: Sure. And thanks so much for having me on today Kevin huge fan of your work and what your team does at Benzinga.
So I’m Andy I’m from Australia and I moved to the US in 2015. My real estate journey really started probably in my childhood. My dad was an architect who got me involved in real estate at a very young age. Used to take me around to building sites and taught me how real estate’s both wonderful and important wonderful and it’s spaces where people live work and play and important in that we’re surrounded by it every day.
Every person interacts with it. And it’s the main driver of our quality of life. He was very influential and helped me buy my first apartment. And I’ve been investing consistently in real estate since then and really seeing how powerful it is as a platform for wealth creation. Things really came together for me in recent years as new blockchain technology started to make its way into the mainstream bringing new efficiency access transparency and other benefits to a lot of different asset classes and real estate’s really no different.
And my co-founder and I were talking about how can we give more people access to this great asset class of real estate with new technology that’s being developed. So we got started earlier this year and have built a great team focused on really unlocking the potential of real estate.
So as far as your second question Kevin what is HoneyBricks? We help people invest in real estate with blockchain. And we do that through a two-sided marketplace for people that want to invest in real estate. And secondly for real estate companies or operators that want to fund their projects or tokenize their existin assets.
So for investors they get institutional quality real estate access through new modern technology. And for real estate operators they get access to new and diverse capital pool and all the benefits of tokenization.
Kevin Vandenboss:Why bring that to real estate? To be honest is it just a like a gimmick to attract new audience?Or is there a real benefit to this?
Andrew Crebar: We’re just starting with tokenization. So tokenization it’s the process of creating digital securities. So when something is tokenized the tokens represent the fractional ownership of that underlying asset. So the tokens really become tangible and more liquid representations of ownership.
Now tokenization is done through blockchain technology which is another word that can get thrown around in recent years. The blockchain’s basically a shared ledger for recording transactions.. The big benefit of blockchain which is the same technology that powers cryptocurrencies like Bitcoin and Ethereum is really two things. One is trustless transactions and secondly is instantaneous settlement. And that’s outside of just real estate that’s really the benefit of what blockchain technology brings. When we think about blockchain’s technologies application to real estate as an asset class I like to think about it in what’s similar to traditional crowd funding.
And then secondly what’s different or better enabled by tokenization. So when we think about what’s similar to traditional crowd funding it improves capital formation allows smaller investors to pull capital and invest in larger projects. And also enables real estate operators and sponsors to raise capital from a larger investor base which is very similar to traditional crowd funding.
When we think about the advantages of tokenization. We like to think about it in three ways. The first one is unlocking value through improved liquidity. So when we think about the liquidity discount that affects many assets tokenization really enables a better secondary market transactions and liquidity.
So investors get all the same benefits of a traditional syndicated investment while avoiding the lengthy lockup periods of 5 ,10 years. The second big benefit is around increasing the pooled investors that can actually invest in these securities.
So there’s this big underserved market which has high demand for the unique characteristics. Real estate can bring stability cash flow diversification and it’s really an enthusiastic investor base that. Wants low cost access to this great asset class of real estate which they don’t have today.
I’d say the last benefit of tokenization is really around just improving the flexibility of ownership. So bringing assets on the chain and those two benefits of the blockchain spoken about previously they can really convert private placements into a financial product. So it means these tokens can.
Kevin Vandenboss: So you reference that these are digital securities. Could you explain that a little bit?
Andrew Crebar: So these tokens are securities of understanding. The regulation is key and similar to other securities security tokens come under the SEC’s attention. So some key things to aware of is they’re very similar to private placements. Although they’re not exactly regulated like stocks or bonds they’re still treated the same way as a traditional investment in a private placement which means in the US there’s accredited investor limitations they need to be launched under either S EC or SEC exemptions.
A huge attraction of applying blockchain to real estate is that a lot of this compliance and regulation can actually be embedded in the underlying smart contract that governs this tokenization.
The value of the HoneyBricks tokens is based on the underlying asset. Now at HoneyBricks today we focus on commercial real estate.We are focused on multifamily assets at the moment. So if we take a $10 million multifamily asset with let’s assume $5 million equity and 5000 tokens minted each token would be worth an implied value of $1000.
Now as that equity of the project grows. So too does the token value. The key thing to know is that’s the implied value of the token and similar to any secondary market. Normally there’s a liquidity discount or sometimes premium of those tokens. So there’s the implied value of the token. There’s also the actual value of the token that may appear in a secondary market in a perfect world those two would be identically aligned but sometimes they’re not.
Kevin Vandenboss:One of the big benefits at least to me in this type of investment is the income from it the cash flow. How is how is that handled in this case?
Andrew Crebar: So it’s handled in the exact same way that it’s handled in traditional syndicated investments in that.based on the distribution schedule of the underlying investment. That’s when distributions would go out to whoever’s involved in that asset. Now what’s different to that is the new let’s call it financial highway of cryptocurrencies which is a very broad term. And there is a lot of speculation and volatility in in cryptocurrencies like any emerging technologies and potential misuse.
But the underlying principles of cryptocurrency and stable coins is very powerful. What that means is as far as these distributions that are coming from tokenized assets generally they’re using the new financial highway of cryptocurrencies whether that’s stable coins or whether that’s using other cryptocurrencies, so as far as those distributions the key thing that would be different is instead of being a checkout to the recipients or a wire transfer. Generally they’re getting stent the distribution straight to that same cryptocurrency wallet or sorry same digital wallet. That’s holding those tokens is receiving the income directly as well.
So you’d have your digital wallet which would hold your tokens. The distribution for the investment comes through and you’d receive that.
Kevin Vandenboss:So are the deals are these like direct deals where there’s you be a specific property or is it HoneyBricks building a portfolio?
Andrew Crebar: That’s a good question. And many crowdfunding market participants do offer both in a deal by deal basis or funds. Today we’re just focused on deal by deal basis. And that can either be new acquisitions that can be recapitalization or that could be existing asset owners just wanting to tokenize their investments.
As you said we are focused on multi-family assets today so the way we go about finding these investments is we have our in-house real estate team. We then identified and focus on target growth markets. We then identify and partner with local sponsors in those markets. Real
Estate’s very much a local game, we’ll then review and diligence specific assets with them. And then if the asset meets our investment criteria will then tokenize it and bring it to the HoneyBricks platform.
Kevin Vandenboss: So for anybody that wants to learn more about this where should they go?
Andrew Crebar: People can learn about us at honeybricks.com. We’ve been working hard the last six months building out an incredible team getting aligned in our strategy and tokenizing our first handful of assets.
We’re gonna be ramping up our marketing and publicity in Q3 2022. So lots of exciting news coming up and you can expect to see more of us and hear more of us in the community.
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