Global REIT is a blockchain based real estate investment trust that plans to use its own tokens to achieve superior means of raising investor money and other efficiencies in the investment process. However, before we look deeper into this, let’s first understand the REIT market and what it entails. REIT stands for Real Estate Investment Trust.
The REIT Market
Real Estate Investment Trusts or REITs are a popular way for investors to invest and diversify in real estate. Any specific real estate property, whether a single family home or a large hotel, has idiosyncratic risk. This means that single properties suffer from a higher risk of something going wrong that is independent of the broader market. Why is that? Consider several factors, from changes in zoning laws to environmental laws to changes in the neighborhood. If a new airport is being built near your home, or worse, a sewage dump, then naturally the value would decrease.
REITs overcome this problem by means of simple diversification. Say a REIT consists of a hundred single family homes. Even if one of them encounters problems and needs to be torn down, you only lose 1% of your income. This is contrast to 100% if you outright owned it. Thus, REITs help investors diversify their real estate exposure and risk. It reduces the idiosyncratic risk associated with real estate in general.
Another reason why investors like REITs is because they can get global exposure. Real estate, especially in emerging markets with fast growing economies, is more attractive to investors. However, most investors won’t be comfortable owning and managing a house in a country they’ve never been to. REITs simplify that process.
Global REIT and Blockchain
Global REIT is a new project based out of Dubai/UAE. It is similar to a traditional REIT, except it uses crypto-tokens on the blockchain for accounting purposes. It also provides other benefits, from loyalty points to ability to stay in one of their properties for a limited time, all tracked through the blockchain.
Global REIT will raise money through an ICO, and have 2 tokens sold to investors. These are Global REIT Fund Manager Token (GREM) and Global REIT Asset Token (GRET). The company currently plans to accept BTC, ETH, and ERC20 tokens along with fiat to buy these tokens. The dividends however are paid USD and USDT. Given the controversy around USDT, hopefully the team can be smart about paying in BTC or ETH instead.
A nice bonus that the team is throwing in is that for investors who hold more than 5,000 GRET or GREM tokens can avail free stays in their hospitality property each year.
As for the actual numbers, the returns are paid out as dividends for both GRET and GREM token holders. GRET pays out a stable 8% per annum dividend on the first acquired asset. The GREM token pays out a 2% AUM (assets under management) that decreases to 1.25% in 0.25% increments over time.
If you’re interested in this project and its ICO, make sure you really understand what you’re buying. The tokens are asset backed by real estate. Make sure you have thoroughly read the website and also their whitepaper. Remember that any token investment is risky and you should never invest more than you can afford to lose.