Happy New Year, Rainmakers! ☀️

Today, I am elated to welcome once again Peter Gaffney as a guest writer.

Peter is our Head of Institution at STM and Head of Research at our sister company, Security Token Advisors.

For the last 18 months, he has embarked on a journey to tokenize every single industry in the world (figuratively) and break down the value adds for those that would be interested in doing so.

The series is called 'Tokenize This' where you can find about 75 examples of different products or industries being tokenized and I thought I'd share one of my favorites this week.

Without further ado, it's time to…

Get liquid & learn about the benefits of 'Tokenizing Air Rights' 💧

💨 Tokenized Air Rights

Building off the real estate feasibility when it comes to tokenization, we are bringing an above-ground concept to Tokenize This. Land is tangible and we can see a pretty clear pathway when it comes to 1) owning a plot of land, 2) fractionalizing the plot into smaller pieces, 3) issuing tokens to represent each smaller piece, and 4) issuing these tokens to the general public.

But is that where the buck stops? What about intangibles associated with ownership of the underlying property? As we’ve seen in other security token use cases, the intangible aspects can be tapped into just as well as the tangibles.

Special shoutout to Jason Barraza and Herwig Konings of Security Token Advisors for the concept we’re about to dive into — Tokenized Air Rights.

Value Adds -

Property Owners (Token Issuers):

• Additional layer of monetization as air rights are typically granted to the underlying property owners

• Great for city development as the buying and selling creates more flexible and customizable property structures

• Real estate investment managers may tap into tokenized air rights as a differentiating factor versus competing managers

Developers and Investors (Tokenholders):

• May access a marketplace to gain better insight and exposure to neighboring air rights

• Another investment layer to cities and areas that are appreciating, especially if land itself is already highly-valued

• Very practical use-case for other property or building developers as they sometimes need to secure adjacent air rights to bring a blueprint to fruition

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Referred to as Transferable Development Rights, the right to construct on top of physical land can be “traded” in a peer to peer fashion between real estate developers and owners. For instance, consider the following scenario:

• Property A and Property B are two adjacent plots of land in a dense city

• Property A is 5 stories high

• Property B is 10 stories high

• Owner of Property B wants to expand horizontally from floors 7–10, which crosses over into Property A’s “jurisdiction”

In this case, the owners of Property A and Property B must come to an agreement regarding the sale of air rights so that Property B can expand as desired.

With tokenization of unused property rights, such as Property A’s space above the 5th floor (aka, the air), property owners can better monetize the full range of their assets beyond the physical development. Especially in dense cities and neighborhoods like Manhattan, Brickell, and River North, real estate developers and property owners are always looking for ways to either 1) monetize their assets or 2) gain access to new opportunities.

Imagine investing in a real estate manager that not only derives revenues from current rental operations but also has this new layer?

Add this to the full revenue stack within Real Estate:

• Sales

• Rental Leases

• Sub-Leases

• Additional Operations

• Air Rights & Development

And from a practical standpoint, real estate developers often find themselves limited to the confines of the plot of land upon which a building is built. To expand outwards, negotiations would have to be made and solidified with adjacent property wonders regarding the ability to build above them (higher up in the air). As one might imagine, this is inefficient and likely comes with a premium to the enthusiastic developer.

Having some sort of marketplace or at least transparency when it comes to air right ownership and availability could create immense synergies within the real estate industry to benefit not only owners and developers, but also residents and tenants via execution.

Comparable Example: TreeBR — Tokenized Carbon Credits

(source)

As previous Security Token Advisors client TreeBR has done with Carbon Credits, an organization involved with air rights (or simply a massive commercial property owner like The Related Group) can do similarly. Essentially, TreeBR has a plot of land with a certain number of trees that are designated for carbon offsetting. Each $TREE token represents one carbon credit via this plot of land, and so companies can purchase $TREE tokens to demonstrate their offsetting of carbon emissions.

The air rights concept can perhaps be managed in similar fashion. The owner of the air rights above certain pieces of land can tokenize them and sell them off to those interested as needed. Things can get so granular that tokens can even be established for long-term and short-term buyers given the 24/7 trading nature of tokens.

Short-term token holders would include advertisers or one-time events, while long-term token holders would include building developers. As demand for certain spaces above buildings increases, so does the value of the air right tokens. Especially in dense and growing cities, sometimes horizontal expansion simply is NOT an option — look vertically and monetize the sky with security tokens.

If you enjoyed this be sure to follow Peter on Twitter. He just published an eye-opening report that breaks down every institution's involvement in tokenization!

Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.

Disclosures:

• No money or other consideration is being solicited, and if sent in response, will not be accepted;

• No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and

• A person’s indication of interest includes no obligation or commitment of any kind.