Is tokenization the future of real estate investing?
Vernon J., the founder and CEO of EquityCoin, discusses the potential of blockchain technology in the real estate industry. He emphasizes the importance of community, explaining that a token is similar to stock and that before launching a token, it is important to have credibility and a track record of success. He goes on to say that this is the next frontier in blockchain technology, and regular companies will be able to tokenize their assets and share the profits with their shareholders. He also mentions that tokenization provides the infrastructure for quick transactions, just like with stocks on the stock market.
[00:01] – [04:42] Behind EquityCoin
- Combating two issues in the commercial real estate market
- Lack of funding available to underserved communities
- High cost of traditional financing
- Removing the bureaucracy and the middlemen
[04:43] – [14:06] Blockchain Technology and Tokenization of Assets
- Blockchain begins and ends with community
- Creating empowerment ecosystems
- Building trust and having a good track record
- Security tokens are actually backed by a company and by assets and are bound by SEC rules and regulations
- Soon, every company is going to have a tokenized component of their business
- Build things in a place of credibility and not hype
[14:07] – [17:04] The Tokenization Movement
- Vernon on what they are working on right now
- Being a missing link between the developer and the community
- Empowering and helping developers and leaders to tokenize through EquityShare
[17:05] – [18:51] Closing Segment
- Think about blockchain technology as the internet of accounting
- Reach out to Vernon!
- Links Below
- Final Words
Tweetable Quotes
“I think blockchain technology is providing a solution where you’re kind of removing the middleman. You can remove lawyers, you can remove different people in that ecosystem or in that cycle that is kind of like superfluous.” – Vernon J.
“I would say, before all of that, it’s a track record. It’s making sure that you have credibility in the game and skin in the game.” – Vernon J.
“When you think about blockchain technology, it’s the basis of cryptocurrency. It’s the basis of security token. It’s the basis of NFTs. It is the underlying technology behind it.” – Vernon J.
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Connect with Vernon! Follow him and EquityCoin on Instagram! Visit the EquityCoin website to know more about blockchain and real estate.
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Want to read the full show notes of the episode? Check it out below:
Vernon J. [00:00]
I want to be able to delineate between a cryptocurrency and a security token, because when people hear blockchain they go right to Bitcoin. Oh, you’re talking about that Bitcoin thing right? But that’s the wrong way to think about it. You know, when you think about blockchain technology, it’s the basis of cryptocurrency. It’s the basis of security token is the basis of NFTs. It is the underlying technology behind it.
Intro [00:25]
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson [00:37]
Vernon J. is the founder and CEO of EquityCoin, the first digital token backed by affordable housing. Since 2006, Vernon has facilitated over $160 million in commercial real estate transactions. And I actually think that number is probably closer to 200. At this point, Vernon, welcome to the show.
Vernon J. [00:54]
Sam, thank you so much for having me. I’m excited. I’m thrilled to be here to talk about, you know, not only EquityCoin, but also giving general pointers in general gems about how to scale commercial real estate, which is near and dear to my heart so…
Sam Wilson [01:08]
I love it. Man, I love it 90 seconds or less? Where do you start? Where are you now how’d you get there,
Vernon J. [01:12]
Started in Brooklyn, went to Massachusetts for high school and college. Then I came to LA, now I’m in LA area, had my grassroots, had my teeth in New York, you know, like they say, you know, you start in New York, you can go anywhere. And I truly believe that. And now I’m on the West Coast, you know, doing the same thing, just trying to create more opportunities.
Sam Wilson [01:32]
You’ve spent a lot of time in commercial real estate scaling commercial real estate, but you’ve kind of taken a left turn, or shall we say, a spin on what you saw in the market? What need did you see in the marketplace? And then how are you solving it?
Vernon J. [01:46]
So you know, Sam, I’ve been blessed man. And I’ve been blessed to work with family offices throughout my career, you know, wealthy individuals, you know, developers, and what I’ve noticed, I’ve actually noticed two things. Throughout my journey. And throughout my career, I’ve noticed that there’s a handful of families and people and individuals and companies that own the lion’s share, the most of the real estate in these large cities. Second thing that I’ve noticed is that when I get financing for my clients, they’re doing workforce housing, maybe it’s 200 units, or, you know, they’re doing a new development, it’s actually exponentially easier to get funding for those types of projects than it is to go to a community that may be in blight, or maybe underserved, that really needs the funding. It’s exponentially harder to get financing for projects in those neighborhoods and in those communities. So I created EquityCoin, as a way to combat both of those scenarios. So that one, I can create, use the blockchain as a mechanism to allow thousands of people within the communities that we own properties to own the assets, but not only that, be able to, you know, combat or kind of replace the bank in the sense where they’re not really providing funding in those communities. So I’m saying you know what, I can come in, I can create this infrastructure, where the community can come together and replace the bank, and actually be another component of the capital stack if we can’t completely replace the bank. So that’s EquityCoin. In a nutshell, we started in the East New York section of Brooklyn with portfolio of assets over there. And we’re expanding to North Miami and South Los Angeles.
Sam Wilson [03:25]
So if you had your way, it sounds like you’d like to just replace the bank entirely. And you guys would just come in as a pure equity partner in these deals.
Vernon J. [03:33]
That’s right. That’s the big idea. You know, where we are right now, I think there will be a need for a mixture within the capital stack to have some financing. But I think, you know, for all intents and purposes, the grand vision is to be able to replace, you know, those centralized organizations that they’re convoluted with so much bureaucracy, you when you get your funding, you’ve ended up paying so much more than I think you need to pay. And I think blockchain technology is providing a solution, where you’re kind of removing the middleman, you can remove lawyers, you can remove different people in that ecosystem or in that cycle that is kind of like superfluous.
Sam Wilson [04:12]
Yeah. I love the idea of blockchain. I love the potentials it has for a lot of industries, especially the real estate industry. It’s which is just I don’t think I’m telling you anything new, so disjointed in the way that deals get packaged up and done. I mean, title searches alone will just tell you that there’s a lot of room for improvement. Are we actually reading a scanned document that was handwritten in 1895? We are reading, okay, great. Just want to make sure it’s illegible. I mean, that’s the type of stuff we’re dealing with. And this will help solve that. But talk to me more practically about the nuances of launching a coin, of getting investors to trust that coin, then having that money then get deployed into the right projects. That’s a lot of moving steps. Can you break that down for us?
Vernon J. [04:57]
Yeah, for sure. It is in everything on the back. blockchain begins and ends with community, right? So if it weren’t for the fact that I’ve been building a community of stakeholders within the East New York section of Brooklyn, and, you know, 2014, I purchased eastnewyork.com, with my family. And that is the go-to place for everything dealing with East New York, the community, it doesn’t matter if you’re running for office, local office, if you’re building a new development, you’re opening up a new store, opening up a new business, whatever it is, all roads lead through eastnewyork.com. And we have over 30,000 members who are stakeholders within the community. So we’ve spent years developing and harnessing the trust within the community so that they trust who we are, they trust know what we’re about. And the idea behind it is to create empowerment ecosystems, right, so where we not only own the media aspect of it, but then we also own the real estate. And we also are connected politically, we’re also connected, you know, with all the stakeholders within the communities, I would say that’s where it starts, because none of where we are today would have been possible without first building out the community. And then it’s also credibility, right? I’ve got 16 years of experience in the real estate market as a CEO of EquityCoin. So I think when we think about blockchain, we think about this technology, it’s not a way where you just come in and you’re, all of a sudden, you can create this billion-dollar company or multi-million dollar industry, I think what is required is a credibility and kind of like the steps to take with any business, you know, that you have. So I use blockchain as a way to create more efficiencies in what we do. Right. And I think that’s how we need to think about it. Because most of these companies that are coming today are doing really well with blockchain technology, they already have a track record of success. I would say before all of that it’s a track record, it’s making sure that you have credibility in the game and skin in the game.
Sam Wilson [06:56]
Yeah, that makes a heck of a lot of sense. It is an add-on to your business. It is not the creation of a new business is what I’m hearing.
Vernon J. [07:03]
That’s right. And when you’re creating a token, it’s similar to creating stock, right? It’s very similar in that I want to for the audience, say I want to be able to delineate between a cryptocurrency and a security token, because when people hear blockchain, they go right to Bitcoin. Oh, you’re talking about that Bitcoin thing, right. But that’s the wrong way to think about it. You know, when you think about blockchain technology, it’s the basis of cryptocurrency, it’s the basis of security token. It’s the basis of NFTs. It is the underlying technology behind it. So a cryptocurrency similar to $1, right? Or the yen, or the euro is not an investment where you believe, don’t get a promise of a return from a currency. And that’s an important factor when you’re dealing with the SEC. But when you have a security token, like EquityCoin, security token is actually backed by a company, it’s actually backed by assets. And that’s different components of blockchain technology. And that’s where we feel is the next horizon, regular companies are going to be able to tokenize their assets, tokenize their company, and allow other people to come in and share the fruits of that labor. One more thing, Sam is like 20 years ago, when the internet was starting to bubble up, right? 20-25 years ago, if you had a website, as a company, you are hot stuff, even simply having a website kind of gave you a competitive advantage, you know, with your peers. But now today, you can go to GoDaddy, Squarespace, you can create your website within five minutes and a pretty comprehensive site, you know. And back then, in order to develop a site, you needed an HTML guy, you needed a PHP guy, it was costly. But again, today, it has become commoditized. So I think we’re in that same space with tokenization. Tokenization, today, EquityCoin is a tokenized company. It’s a hot-button topic. And I think it’s cool. But in 20 years, it’s going to be commoditized, you’re going to be able, every company is going to be using Blockchain or having a tokenized component of their business, it’s no longer going to be a novelty, but more of like a necessity, and more like what you need to do in the business. So I think right now, if you’re tokenizing your company, it better have a utility, it better have some sort of advantage. You know, you’re not just tokenizing for the sake of tokenization. That’s an important piece to interject it.
Sam Wilson [09:26]
Appreciate you taking the time to really give some clarity around the difference between crypto security tokens, NFT’s, all of that. So you took the step you created EquityCoin, right? You did that, and then I know you said you kind of piggyback that on eastnewyork.com. So you said hey, you started go out to your network. What do people do? Do they just trade their dollars for EquityCoin? How does that work? That’s right,
Vernon J. [09:49]
So you’re trading your fiat currency or it could be a cryptocurrency that you might have, Etherium for example. You can trade that into EquityCoin, and now as EquityCoin holder, you’re entitled to quarterly dividends that are paid out from the income from the real estate. But the beauty of tokenization of a company or a real estate or an asset is that it gives you the ability to liquidate quickly. In a normal real estate transaction, if I have 1000 investors in this investment, normally, you can’t get out of your position until we sell the entire asset. Or if you find somebody who might want to purchase your shares, then we got to have to get a lawyer involved.
Sam Wilson [10:27]
200 pages later, we’ve traded money.
Vernon J. [10:29]
Later, now we finally transferred, but with blockchain and with tokenization, it provides the infrastructure for you to be able to transact as if you were on the NASDAQ or the Russell but you can be a company that maybe only has $10 million in assets or $20 million in assets. But now you can trade as if you were, you know, publicly-traded or similar to a REIT.
Sam Wilson [10:50]
What are the securities considerations around this? I mean, this seems like it’s an ever-evolving landscape where it’s like, oh, one day you can do this. And oh, the next day yo, is 10 million bucks. Because you made a mistake, buddy. I mean, you see this stuff in the news all the time. How are you navigating that landscape?
Vernon J. [11:06]
Right. So here’s the things, Sam, when you have increased freedom, you have increased responsibility, right. And when you’re talking about cryptocurrency, if you own your crypto, and again, there’s a difference between cryptocurrency and security tokens, right. But if you own your cryptocurrency, and you have it on an exchange, or you have it on your hard wallet, which I like to use ledger for the audience if they’re interested, but you own that, and you are in full control of that. So if somebody steals your keys, your wallet, keys or somehow hacks you, there’s no, you know, authority you can go to because that is kind of like the essence of the cryptocurrency world that you don’t have ownership, right. But on the flip side, you’ve got security tokens. And since security tokens are bound by SEC rules and regulations, I’ll give you an example one of my token holders lost their keys to their wallet. So we had to replenish, we had to burn their previous tokens, and then replenish their new tokens. This is something that’s required with the SEC. This is again, Sam, why I believe that the tokenization of companies and security tokens as a whole is on the horizon is on the cusp of something big because I think people are looking for that balance. They want some security, but then they also want some freedom, and they want it in the middle at this moment. And I think security tokens brings those dynamics to the table.
Sam Wilson [12:31]
Yeah, and I think that is an interesting difference between a cryptocurrency and a security token, and that you as the sponsor can issue those security tokens. What have you found on the implementation side of it? Like I know, it’s touted as, Hey, these are things that make it easy, we can have 10,000 investors each put in $1. And it’s no more work than if I had one investor for $10,000. It’s all the same. So I’ve been told, I don’t know, because I don’t do this. Is that true?
Vernon J. [12:58]
Again, Sam, it all comes back to community, right? Have you created that trust within your community or are you just creating this token out of thin air with no credibility and saying, hey, I want to do this big idea. And now people are investing in that idea. But then they don’t have the complete trust. So if they don’t have the trust in you, or in the project, it becomes a lot more cloud. And I’ve seen projects kind of falter, because they’ve kind of built things from a place of hype. When you build something from a place of hype, it’s easy to crumble, it’s easy to come down. Everybody listening to this, you know, if you’re thinking about tokenization, if you’re thinking about, you know, using blockchain technology, you know, tap into your credibility of what makes you great, and what makes you unique, because that combined with blockchain technology is super powerful.
Sam Wilson [13:47]
Right. And I think one of the takeaways from this is to demystify some of it is that it isn’t the recreation of a new business, it’s a different way of doing business. Same thing we were doing before, it’s a different way of doing it. That brings just some new communication, some new potential ease of implementation to the operator to the investors, but it’s not, it’s still the same actual business. Last question for you, I think I might have more, is on the how you guys are selecting projects. I know you’re one of your big pushes the affordable housing side, I’m assuming you guys put the money together and then go out and find quality operators to work with or are you guys as well doing the projects yourself?
Vernon J. [14:27]
So for EquityCoin, we are doing the projects ourselves. We actually have a call this afternoon with a developer in Brooklyn who’s doing a $250 million development, and they’re looking to equity coin to be a part of their capital stack so that we can bring the community in so they can own a piece of the asset. They own a piece of this new development because they’re getting a lot of pushback from the community because the community said hey, you guys are coming into our neck of the woods from outside and you’re not even giving an opportunity for people within the community to own a piece of this right? So now you know EquityCoin can come in and be that missing link from, you know, that bridge between the community and the developer. That’s one component. The other. Another big thing that we’re working on right now is a system called EquityShare. And what we envision an equity share to be is sort of like the coin base for real estate tokens. And we want to empower other community developers and leaders, you know, like myself all over the country who are looking to tokenize and create a token for their movement. So we can actually help them with the infrastructure of legal compliance, you know, the smart contract, you know, all the SEC, FINRA, making sure that they are breeding a holistic approach to tokenization. And now on equity share, you know, we’ll have 100 different tokens that are backed by other assets. It can be a student housing token, it could be a retail token, it could be Amazon warehouse token, Airbnb token, you know, the options are endless. But I think what’s important is having the right infrastructure. And again, like I said, before, when the internet started, it was hard to create a website, it was costly. Now you do it in five minutes. And right now, if you want to create a token, it’s pretty costly. If you want to create a comprehensive token that has rate network, bring working in the smart contract, but in five to 10 years, you’re going to be able to do that, in a snap of a finger. And for EquityShare. Our goal is to get there pretty quickly. So we can, yeah.
Sam Wilson [14:41]
If you were taking a stab at what the cost is right now to develop a quality token, what do you think that is?
Vernon J. [16:32]
I would say a minimum of 100,000, minimum of 100,000. Because if you look at our balance sheet, most of our capital goes towards compliance, right? So making sure that the token is created in a way that is congruent and consistent with SEC rules and regulations. You know, that’s one piece of it. But then also, you’ve got to make sure that you have the KYC AML. So know your customer, anti-money laundering, these are all things that need to be baked in so that you can avoid fraudsters on your system. It all comes together, I would say about 100 G’s.
Sam Wilson [17:03]
Right. Got it. Man, Vernon, I love what you’re doing. I love your mission. And I love the way you’re taking it down. That’s absolutely awesome. I mean, and just the idea of you building eastnewyork.com and then coming in and just augmenting that with obviously, blockchain technology, security tokens, all that stuff. And thanks for taking the time to really explain that I think you explain in a very clear way that for a lot of us, myself included, it’s commonly like I think I get it but not quite sure. So thank you.
Vernon J. [17:32]
Let me leave you with this sample. When I explained blockchain technology, I tried to explain it as the internet of accounting, right? When you start thinking about it like that, it’s like okay, you know, you’ve got it’s simply a ledger, and it’s a ledger that can’t be disrupted, can’t be you, know, messed with. And when you have that, you create this trustless society where you now can, every transaction that you make on the blockchain is recorded and recorded forever as long as you have an internet connection. Yeah.
Sam Wilson [17:59]
That makes a heck of a lot of sense. Vernon, if our listeners want to get in touch with you what is the best way to do that?
Vernon J. [18:05]
Best way is most likely Instagram. My Instagram is @vpeso and then also Instagram @equitycoin, follow our journey. We just did a filming for PBS. So we’re going to be in their next segment for their Nova documentary series. Really cool. So look out for that in November.
Sam Wilson [18:22]
Awesome, man. Vernon. Thank you again for your time. I do appreciate it.
Vernon J. [18:24]
Sam. Thanks a lot, bro.
Sam Wilson [18:25]
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories so appreciate you listening. Thanks so much and hope to catch you on the next episode.
