The owners of the St. Regis Aspen Resort in Colorado have begun to sell real estate security tokens on a blockchain with help from Indiegogo, a crowdfunding site.
“We think we have a once-in-a-lifetime opportunity to create a benchmark for what real estate tokenization looks like,” said Stephane De Baets, founder and president of Elevated Returns, owner of Aspen’s St. Regis and other hotel properties. Tokenization refers to the process by which an asset, such as equity, real estate, or fine art, is divvied up into fractional equity ownership stakes that are digitally tradable.
The St. Regis Aspen Resort represents one of the first major real estate properties in the U.S. to test out tokenization, a hot topic among cryptocurrency enthusiasts, investors, and crafty financial engineers. The St. Regis’s owner abruptly scuttled an investment trust IPO it had planned for the property in February, and the firm shifted its tactics to the world of blockchain.
“Having a clear asset like the St. Regis Aspen is the beginning of signaling a shift in how people think about tokenization and investing in blockchains and crypto,” said Slava Rubin, CEO and cofounder of Indiegogo. He drew a distinction between the high-flying, speculative ICOs, or initial coin offerings, that raised billions of dollars last year versus security tokens, which are backed by assets rather than dreams of new software.
Indiegogo debuted a platform for ICOs, or initial coin offerings, in December, but the crowdfunding site decided not to hold public sales after the Securities and Exchange Commission began cracking down on the frothy industry. The SEC’s first enforcement action against an ICO hit RECoin, an outfit that claimed to have created a real estate-backed cryptocurrency.
The token associated with the Aspen St. Regis is Indiegogo’s first security token offering. “Next year I will not be surprised if security tokens becomes much more normal,” Rubin said.
To conduct the sale, the owner of the Aspen St. Regis has created a single-asset real estate investment trust, or REIT, called Aspen Digital, that is selling tokenized equity in the form of Aspen Digital Tokens. Alternatively dubbed Aspen Coin, the tokens, which are not registered with the SEC, represent common stock with no voting rights.
Aspen Digital plans to sell 18 million tokens at an initial valuation of $1 apiece, a fundraise that, if successful, would boost the property’s valuation from more than $200 million to about $224 million. The tokens are tied to Ethereum, the second-most valuable cryptocurrency network next to Bitcoin.
In conjunction with a broad sell-off in the cryptocurrency markets, the price of Ether, Ethereum’s native coin, has plummeted precipitously from highs above $1,120 earlier this year to near $270 today.
Indiegogo is making the tokens available only to accredited investors. The coin sellers intend to use Templum Markets, a registered broker dealer that operates an alternative trading system, as the financial partner that will provide the infrastructure on which the token will be traded.
De Baets told Fortune that he was interested in pursuing tokenization so that he might “bring liquidity to the real estate sector.” He said the tokens will amount to 18.9% of the Aspen St. Regis’ equity while Elevated Returns will hold onto the remaining 81.1%.
Marriott, which own the St. Regis brand, has no involvement in the deal, De Baets said.
If all goes well, De Baets has plans to continue tokenizing properties in Elevated Returns’ portfolio. “We’ve lined up a substantial pipeline of global properties to bring to market subsequent to the first offering,” he said, mentioning hotels in Singapore, Hong Kong, Thailand, and around Washington, D.C., as next up.
“A whole lot of people don’t want to sit on depreciating fiat cash in a bank account,” De Baets said. “A high profile trophy asset is something you can be emotionally connected to and build a little bit of your savings portfolio on.”
“We think future lies in everyone starting to keep more wealth in appreciating asset-backed tokens” rather than cash, he added.