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HOW TO LEVERAGE PRIVATE BLOCKCHAINS FOR MULTI-INVESTOR PROPERTIES

Private blockchains for multi investor

NTrust offers a unique blockchain approach for commercial real estate. Blockchain is a new technology that has only recently begun to be adopted. In the commercial real estate industry, the main reason to utilize blockchain technology is to establish trust, streamline transactional costs, improve due diligence, and create data integrity that allows data to be confidently loaded into the buyers’ lease administration and accounting system.

Let’s take a deep dive into how to leverage this private blockchain technology for multi-investor properties.

Blockchain is poised to change the CRE industry in a number of ways:

  • Asset Management: By facilitating the automation of invoicing, reconciliations and lease management, blockchain can improve how large, multi-tenanted properties and portfolios are managed.
  • Property Searches: Blockchain can transform property searches globally by increasing access and transparency.
  • Smart Contracts: Increased transparency in the transaction process can result in faster closings. Documents on a blockchain are immutable, but the amendments that have been approved by all parties can be appended to signal changes.

Blockchain was established after the crash of 2008 as a way for entities to be able to operate outside the current banking and global financial system. It was created to allow for direct transactions to take place between individuals based on a public distributed ledger of the item being transacted. In order to be successful, it requires:

  • A community of people who can agree on what should be represented in the blockchain as part of the value asset
  • A distributed network of people who will host the blockchains and maintain the security algorithms
  • A secure protocol for the update of information in the distributed public ledger

Private blockchain technology will result in faster transaction processes, particularly with multi-investor properties. This improved efficiency will have many financial benefits, such as reducing the friction costs of CRE transactions such as fees tied to the preparation and review of documents.

NTrust has services that directly support the implementation of blockchain technology for commercial real estate assets:

  • Hosts private blockchain files
  • Ongoing maintenance of private blockchain date for tenant, rent, lease, and facility information
  • Facilitating transactions between principals including fractional sales and 1031 exchanges

NTrust has been partnering and working with industry leaders in blockchain to ensure compatibility across multiple databases and platforms. They have created a private blockchain to facilitate the transaction of non-traded funds and maintain and update tenant and asset data for all parties.

Despite all of these positives of private blockchains for multi-investor properties, there are still hurdles that remain. There are currently no technical standards that exist to guide blockchain implementation across industries. Another issue is that distributed databases are generally slower than centralized ones, which may limit certain applications that demand high speed and volume.

Despite these obstacles, private blockchains can be highly beneficial for multi-investor properties. NTrust will keep track of tenant entities, rent streams, expenses, security deposits, easements and anything that is required by financial evaluation software to ensure all transactions are timely and trustworthy.