Private Equity and Blockchain are Supporting Growth in Real EstateBy Abe Schlisselfeld | January 28, 2020
It would be hard to find two more exciting sectors of the investment world than private equity and real estate. Bring them together for a three-day conference like the IMN Winter Forum 2020 and you get a ton of buzz, new ideas to explore and, for me, the bottom line: a lot of deals still to be made. I was fortunate to attend and host a panel at the 17th Annual IMN Winter Forum on Real Estate and Private Fund Investing, which brought me over to the west coast in Laguna Beach, California. Here’s what I took away from the conference:
First: there is plenty of private equity looking to be invested in U.S. real estate opportunities. The soundness of the American market remains unchallenged, and investors with clear eyes and longer-term appetites are finding the right opportunities across many sectors, including multi-family, industrial and office. Fiscally responsible investment deals in real estate will find sources of private capital from both U.S. and foreign sources.
Second: there is a call within the real estate private equity community to move toward uniformity, transparency and standardization when it comes to the back-office backbone of investing, and by this I mean, in particular, the use of blockchain technology.
Here’s what I mean about that. I had the opportunity to moderate a panel at the Forum entitled Advancements and Next Steps in Blockchain/Tokenization Adoption Within the CRE Industry. Our mission was to discuss the latest blockchain adoption in different facets of the industry, advancements in overcoming hurdles and what industry stakeholders need to be aware of to not be left behind. The panelists (David Gaultiere from Appfolio Investment Management, Daniel Chin of Noble Street Advisors and Ned Montenecourt from Phoenix American Financial Services) and I did our best to focus the conversation around these topics, as well as others—what applications are seeing traction, such as Docusign? What are the first steps towards adoption for those wanting to jump on the bandwagon? What will it take for it to be widely accepted and where exactly does the SEC stand on blockchain technology?
All good questions that we tried to answer, but for now I want to make this point: time has proven over and over that when technology disrupts marketplaces it is inevitable that a demand for standardization quickly follows on. The reason is clear: investors are not gun shy about deploying new technology, but they’d certainly like some assurance that the underlying tech is robust and that critical elements, like new database applications that are being created using blockchain technology, will be hardened enough to withstand digital attacks and also meet regulatory scrutiny.
During the panel, we heard a lot from our audience about their concerns over adoption. They wanted to know about real world applications, such as how blockchain can be used for limited partnership strategies—e.g., could a database of pre-qualified investors be developed…and trusted? It is this kind of real world application that is seeing the most excitement and interest and, to me, is indicative that blockchain technology is reaching its earliest stages of maturity…with much more room for development before it is widely adopted. The momentum is there, to be sure.
I also thought it interesting to hear from people who have observed a dichotomy in risk tolerances from coast to coast. It seems that there might be a more conservative approach to blockchain adoption among east coast investors and an increased risk acceptance among those on the west coast. I wonder if others have noted anything similar?
I encourage readers to let me know what you’ve been hearing and reading about when it comes to real estate and private equity back office technologies. Do you have a rudimentary understand of blockchain and is your firm or fund considering the need to get smart about it? Let me hear from you so we can keep the conversation going.
About Abe Schlisselfeld
Abe Schlisselfeld, CPA, EA, is the Managing Partner of Marks Paneth LLP. In this capacity, he oversees the firm's operations, manages business development efforts and consults on key clients. He is chairman of the firm’s Executive Committee and plays a major role in developing strategy, setting policy and overseeing acquisitions. Prior to becoming Managing Partner in 2021, Mr. Schlisselfeld was the Partner-in-Charge of the firm’s Real Estate Group. In that role, he advised commercial and... READ MORE +