The ambition of Fraktion is from democratize l’real estate investment with a admission ticket from 10 euros. To do this, the tokenise an well in the form of security tokens. Within 6 to 18 months, Fraktion wants to implement a secondary market and interconnect with the DeFi.
“We’ve been sold the tokenization of real estate since 2015, and let’s face it, not much has happened since then,” said industry expert and TokenLand founder Florian Freyssenet in late 2022.
While the regulatory framework has not evolved, action is nevertheless multiplying, as illustrated by the French platform Fraktionwhich is releasing its public launch.
Tezos, a sure bet in Europe
“The market is developing, even beyond Tezos. Numerous initiatives are being launched for the end of 2023 in this area,” comments Cédric Roche, Adoption Manager France at Nomadic Labs.
Tezos R&D Lab in France supports Fraktionhas chosen this blockchain for its operations. This choice is justified by the startup’s CEO, Vincent Pastorby several factors, including performance, the low transaction costs of the Tezos networkand the technical mastery of its environment among the development team.
The regulatory players in France, but also at European level, are familiar with the Tezos platform and are rather benevolent towards it.”
In addition, several tokenizationtokenization, for example at the initiative of SG-Forge, have already been carried out on the network. Tezos enjoys a real reputation in the world of security tokens and their regulation,” the executive tells RoyalsBlue.com.
Opening up fractional investing beyond the crypto sphere
Fraktion considered Tezos “the best choice” and therefore intends to pursue its development on this network, including the decentralized finance component that the startup plans to add to its service within the next 12 to 18 months. However, it is on Ethereum that the DeFi is the most established to date.
“The Tezos application ecosystem is consistent enough for us,” says Vincent Pastor. The support ofEthereum or any other blockchain network is not currently on the roadmap.
Our aim is to design a high-performance service capable of contributing to the Tezos universe,” he continues.
And the executive insists on the business service provided to users, namely real estate investment and split for individualswhich takes precedence over the underlying technology.
On the site, blockchain is not given much prominence. It is above all a powerful tool for securing and streamlining transactions.”
Technical complexity must be invisible for users, ambitions the executive, whose target audience isn’t made up solely of savvy crypto finance users. Through his approach, Fraktion wishes to distinguish itself from players such as RealT in the U.S., more geared towards crypto regulars.
Our starting criterion is to offer the possibility for anyone to invest on the platform and understand the value of fractional real estate investment. The presence of blockchain should be secondary.”
Tokenized convertible bonds
The use of Fraktion resides in real estate investment from 10 euros. To achieve this, investors will acquire security tokens corresponding to bonds convertible into shares. Users acquire shares (in a company that owns the property), giving them the right to returns depending on the asset(s) in their portfolio.
To provide investors with properties, the service launches this Tuesday, July 11, via an exclusive partnership with Sezamea real estate leasing company. The latter offers home-ownership leasing. Further partnerships are planned over the coming months to supply the platform with additional properties.
” The idea is not to be an SCPI that integrates blockchain “explains Vincent Pastor. The stated aim is to enable micro-investors to customize their real estate investment strategy.
Eventually, we’ll be offering automatic diversification solutions in the same way as SCPIs. This is a use enabled by blockchain and smart contracts.”
For the time being, the priority is to open up to investors with lower available capital to democratize real estate investment. Fraktion aims to be a OpenSea for real estate – which in future will bring together industry professionals and even private individuals with physical properties.
For the start-up, however, the company has chosen to rely solely on partners capable of offering a sufficient volume of properties. Two other partnerships will be launched during the summer, “one of which has been making over 100 rental investments per month for several years”.
Subscription campaigns and mint on Tezos
In terms of process, each asset is examined upstream in the form of a dossier by the experts at Fraktion. Thanks to in-house expertise, the CEO promises a real analysis via a grid comprising 50 to 100 filters (local demographics, unemployment rate, economic attractiveness, number of students, etc.).
Once a property has been approved, a subscription campaign is launched. Investors decide whether and how much to invest. A minimum threshold must be reached to proceed to the next stage, with KYC and electronic signature.
After the legal withdrawal period, the mint of tokens is triggered and tokens issued in wallets currently managed by the platform. Eventually, these wallets may take on other natures – including cold wallets for micro-investors. Once issued, the smart contract which governs the life of the financial security, a convertible bond.
Automatically, when we collect the rents from the property managers, the funds are sequestered with a third party, Mongopay. Thanks to an API synchronization, as soon as the rents are deployed, the smart contract manages the distribution key according to the token holders”, explains the CEO.
A P2P secondary market, then via DeFi
Fraktion only offers operations on the primary. The startup does, however, aim to integrate a secondary market for the tokens issued.
We are examining our regulatory leeway to offer a high-performance solution that complies with AMF obligations and recommendations.”
The goal in 6 to 8 months’ time is that of the secondary via P2P transactions. Within 12 to 18 months, the company hopes to go even further with the addition of a decentralized finance.
We are already in negotiations to enable holders of fractional tokens to refinance themselves by collateralizing their assets with DeFi players,” announces Vincent Pastor.
“Opening up to decentralized finance, referencing on DEXs and so on. This is the major project we’ll have to manage in the coming year. 2024 ! “. These developments are complemented by other business objectives. By 2023, the startup is targeting 8 million euros in tokenized assets30 to 40 properties. In September, Fraktion will have 25 properties accessible on its platform.
2023 also aims to test the scalability of the model and customer support. For next year, the startup has set itself a target of 50 million euros in tokenization.
The great strength of the architecture deployed is its scalability. We need to be able to break down the assets entering the platform in an industrial way. By September, 25 assets will be running constantly. And the marginal effort to go from 25 to 250 is relatively low.”
Fraktion collects fees on issue and at events
Industrialization is based on automation of operationsfrom token issuance to rent distribution”. Distribution still needs to be activated manually, although the company plans to automate this too.
The automation enabled by the blockchain makes it possible to democratize financial products – refinancing, collateralization, forward contracts, etc. – for investors with lower entry tickets.
To finance its model, the startup is remunerated by the primary issuance of tokens by charging a percentage of the property’s value. “The notary collects 7 to 8%, Fraktion does the same thing by remunerating itself at the time of this operation”.
During the life cycle of real estate investmentit will also levy fees during events. These include rent collection. Like a real estate agency, it collects 6% of the amounts.
Eventually, on the secondary market, the startup plans to apply “marginal” fees on transactions, “no more than 1 to 1.5% of the token’s value”.
To followCrypto news and Web3find RoyalsBlue.com on TwitterLinkedin, Facebook or Telegram