New Company Makes Play for a Real Estate NFT Market

NFTs—short for the cryptocurrency concept of non-fungible tokens—have reached the market madness level in general. But they have still been largely limited as an object of experimentation in commercial real estate. A new startup is trying to do more with the concept.

Hamilton Souther, Randall Johnson and Nathan Windsor, co-founders of the company LiquidEarth, supposedly launching in the third quarter of this year, in a guest post on Nasdaq argued for fully combining real estate with NFTs. “Global innovators have turned their attention to the real estate industry as the next NFT opportunity,” they wrote. “This merger of the world’s oldest and newest asset classes could very well prove to be the single biggest utility for NFTs, and also the next step in the evolution of real estate.”

In CRE, interest seems to have moved mostly to tokenization that would more readily enable fractional ownership and marketing of real estate. The thought is that automating a process of letting people buy shares in a building or portfolio would mean a broader market of potential investors, which should drive up interest and prices. Tokenization and fractionalized ownership could also eventually mean greater and easier liquidity, a benefit for investors of all sizes.

That’s not the case with NFTs, the trio from LiquidEarth acknowledged, calling them “non-divisible, non-fungible assets.” They can only have one owner at a time, and they aren’t exchangeable.

“In its current state, the real estate industry is heavily dependent on brokers who connect buyers and sellers,” they write. “The transfer of property ownership is time-consuming, requiring extensive paperwork. Moreover, the real estate industry is fragmented, and buyers are limited by geographical boundaries. This increases the difficulty for international property purchasers.”

True, and having the ability to discover properties and process transactions online could help expand availability and visibility of CRE assets. Such assets potentially could be placed as collateral for loans, such as has been done in crypto mortgages, at least with cryptocurrency.

Where the authors make a mistake is in the following: “Although they were initially considered a passing fad, NFTs rallied against all speculations and established themselves as a viable asset class. While NFTs have significant use cases in the art, finance and entertainment industries, their integration with real estate is what ultimately represents the single biggest real-world use case. This integration brings much-needed credibility to NFTs as an asset class. The oldest and newest asset classes can unite creating a plethora of new opportunities.”

The value doesn’t come from NFTs themselves, but the assets they represent. They are a useful transfer mechanism, but don’t seem to have inherent value themselves, even with all the wild speculation in them that has taken place. In that sense, perhaps they have something to offer in real estate, but that will have to be utilitarian with no mistaken confusion between a tool and the actual asset—a property itself.