Luxury apartments in Tokyo, inns and hotels in Kyoto, which is popular with inbound tourists… New digital financial products that allow small investments in specific real estate are on the rise. Security tokens (ST) are based on blockchain, which is said to be impossible to tamper with data, and are used to securitize real estate assets into smaller units and trade them in encrypted tokens.
The government has developed laws regarding security tokens, and major financial institutions such as Nomura Holdings, Mitsubishi UFJ Financial Group, and SBI Holdings have been working to develop markets for new digital financial products. In December, the newly established Osaka Digital Exchange (ODX) began operating a secondary market that handles some security tokens.
What kind of investment experience can security tokens provide for individuals? In this article, I would like to actually purchase a real estate ST and think about the operation of the ST.
Search for real estate digital securities that can be purchased for 100,000 yen
Since I don’t have a lot of cash on hand, I will try purchasing real estate ST with a maximum of 100,000 yen. If you search Google for “real estate ST that can be purchased for 100,000 yen,” you will find that multiple companies are selling real estate ST with an investment unit price of 100,000 yen.
I’m not favoring anyone, but I’m going to try using ALTERNA, a service operated by Mitsui & Co. Digital Asset Management.
Use your smartphone and laptop to complete the application process for opening an account on Alterna. You enter your bank account information, answer questions about your past investment experience, and take a photo of your My Number card or driver’s license with your smartphone camera to complete the KYC (personal verification) process. The application process took about 5 minutes.
I applied to open an account on the last Friday of the year, and received an email confirming the opening the following Monday. Next, let’s look for real estate ST products to actually invest in.
What do you think about the expected yield of 3.4% with a 5-year investment period?
When you log in to Altana and look at the “Project List”, you will see things like “Kyoto Sanjo Hotel” with an expected yield of 3.6% and “Atami Onsen Adult’s Hidden Inn” with an expected yield of 4.0%. With the number of overseas tourists continuing to increase, investing in lodging facilities at tourist destinations seems attractive, but the recruitment period for both of these facilities has already ended.
One of the projects currently being solicited was a “luxury residence in Nihonbashi, Tokyo.” The expected yield is 3.4%, and the investment period is 5 years and 1 month. It is a 12-story reinforced concrete building with one basement floor built in the commercial area of Nihonbashi, Chuo-ku, and has 44 units in two types: 2LDK of 60 square meters and 3LDK of 75 square meters.
Once operations begin, rental operations, building management, repairs, and renovations will be carried out in accordance with the business plan created by the asset management company. Based on the lease contract for each room, monthly rent is deposited, and costs and loan interest payments are deducted from this amount, and investors are paid twice a year as dividends.
The fee paid by individuals purchasing ST real estate is stated in the prospectus as the difference between the issue price and the issue price (4,000 yen per unit). The investment period is 5 years and 1 month, but if you want to sell your stake midway through, you can sell it at a price calculated based on the standard price (NAV = Net Asset Value), which is calculated based on the appraisal value of the real estate you are investing in. It is explained that you can apply for .
If you search for news on Google, articles with titles such as “Why real estate is resilient to inflation” come up. In 2024, there are speculations that the Bank of Japan will finally shift its long-term monetary easing to tightening, and given the possibility that domestic prices and interest rates will rise, it is likely that some of the assets will be allocated to real estate ST. Is that also a good idea?
While questioning myself, I proceeded with the procedure to purchase 100,000 yen worth (1 unit) of digital securities (ST) for a “luxury condominium” in Nihonbashi.
No digital asset wallet required to purchase “tokens”
First, transfer 100,000 yen from your online bank account to the bank account specified by Alterna. When I checked the payment on the application list page on My Page, the cash balance was displayed as 100,000 yen.
Next, apply for the lottery and wait for the announcement of the winning results.
Until the announcement, download the prospectus for the digital security you are purchasing and try to understand the details of this financial product. For many amateurs and investors, a PDF file with more than 130 pages full of financial terminology is not something they can easily understand.
Prospectuses that explain financial products have rules such as items to be listed and expressions that can be used, and the amount of text is enormous, making the wording difficult for the average reader.
It has been pointed out that “Japanese people’s financial literacy needs to improve,” but wouldn’t a prospectus that generally explains financial products be an easier-to-understand document with simpler language?
In Japan, where personal financial assets have grown to 2,100 trillion yen and most of them are cash and deposits, there has long been a call to “shift from savings to investment,” but unless financial terminology and financial knowledge are democratized, the relationship between financial products and individuals will change. Isn’t the distance between them difficult to shorten?
The winning results for the luxury condominium in Nihonbashi arrived safely on the specified date and time. When I logged in to Altana and completed the final application process, I was informed that my digital securities would be delivered in a few days.
When trading crypto assets (virtual currencies) based on blockchain technology, crypto asset wallets (applications) are often used, but when using domestic services that handle security tokens such as Alternative, download the wallet. do not have to.
You can open an account on Alterna, make purchases, receive payments, and check the operation status.The entire process is simple and I feel that users will not be confused.
Stock prices indicate corporate value, and what indicators do you use to analyze a single real estate property?
When investing mainly in stocks and government bonds, many individual investors prefer to invest in ETFs (listed ETFs) managed by asset management companies such as Nomura Asset Management, Mitsubishi UFJ Asset Management, BlackRock, and Fidelity. There is a tendency to make cumulative investments based on investment trusts.
There are various types of ETFs, and the stocks in the basket (ETF) differ depending on themes, industries (sectors), etc. After that, many investors will conduct their own research and select and purchase individual stocks such as Microsoft, Amazon, and Tesla stocks.
In real estate, REITs are ETFs that use funds collected from investors to purchase multiple properties such as office buildings, condominiums, and commercial facilities, and then distribute the returns to investors. REIT is an abbreviation for Real Estate Investment Trust, which falls under the category of investment trusts.
With EFTs that track indexes such as the S&P 500 and the Nikkei Average, even amateur investors may be able to perform some analysis by following data and news regarding the economic situation in the United States and Japan. To predict individual stock prices, you can read quarterly financial reports and business announcements published by companies, and refer to research notes regularly published by securities company analysts.
On the other hand, real estate ST is a new financial product that allows you to invest in individual stocks (single real estate). Compared to funds such as REITs, you can invest in specific properties, so you may feel a sense of attachment to that single property. At the same time, because it is single, there is an incentive to find out more about the property.
On the other hand, since it is a single piece of real estate, it may be necessary to investigate the economic activities and characteristics of the area where the property is located, as well as trends in land prices.
News services necessary for the expansion of the security token market
I received an email from Alterna informing me that the process of purchasing securities has been completed.
When I log in to Altana and check the “Assets held” screen, I see that the cash I was holding has changed to “Mitsui & Co. Digital Securities” and my total assets are displayed as 104,008 yen.
Clicking on “Operation Status” shows that the unrealized gain/loss is +4008 yen, and the current yield is 4.01%. Why is there an unrealized gain on the first day I receive the securities?
When I read the email I received again, I found that when Mitsui & Co. Digital negotiated the acquisition of the investment project, the property was acquired at a lower price than the appraisal value, so there was unrealized gain from the first day. It is explained that it occurs.
The prices of listed stocks are determined by the market every day, but real estate prices do not. Instead, there is a reference value called “real estate appraisal value” calculated by a real estate appraiser based on nearby transaction examples and revenue information.
In 2024, new STs are expected to go on sale in Japan, and the domestic transaction volume is expected to increase. Osaka Digital Exchange, in which SBI, Sumitomo Mitsui Financial, and Nomura Holdings have invested, started distribution transactions targeting some STs in December last year, but the number of STs handled by ODX will increase and the transaction volume will increase. will increase.
As the ST market grows, there will be a greater need for easy-to-understand and useful news for individual investors as well as neutral analysis services that can be used as reference for investment decisions.
｜Text: Shigeru Sato
｜Editing: CoinDesk JAPAN Editorial Department
｜Image: Photo of the property in which the author invested in ST (Courtesy of Mitsui & Co. Digital Asset Management)