Seat Moey Eng, a consultant to law firm Allen & Gledhill and former group head of capital markets at DBS Bank; Samuel Lee, CEO and executive director of Fraxtor, a Singapore-based fractional real estate investment platform; Melvin Chay, senior director at broker Knight Frank; and moderator Cheryl Seet, head of wealth markets at CapitaLand Investment speaking at a ULI Singapore panel.
A seminar organized by the ULI Singapore NEXT Committee presented attendees with the little-known concept of real estate “tokenization,” or fractional investing/trading, as a potential bridge between private investors and direct ownership. Although not new, tokenization in real estate is a niche market, particularly in Asia Pacific, with Singapore hosting a small number of the specialized digital platforms.
The seminar brought together a panel of experts in real estate, tokenization, and capital markets to discuss the potential of this unique approach to real estate ownership. A straw poll before the discussion revealed that few attendees considered themselves knowledgeable about the topic.
The experts explained that tokenization can be an attractive option for private real estate investors because it addresses four key challenges: one, it lowers the entry barrier by reducing the capital outlay often required to acquire real estate; two, it provides access to vetted investment opportunities that might otherwise be difficult to source; three, it removes the burden of active asset management, which can be both time-consuming and complex; and four, it offers enhanced liquidity compared to traditional real estate ownership, making the investment more flexible and accessible.
Fraxtor CEO Lee said his company is licensed by the Monetary Authority of Singapore (MAS) and uses blockchain to “tokenize” real estate assets. “The investor owns tokens which represent an economic interest in the underlying asset,” he said, “which could be a private equity real estate investment in the form of a fund or a direct real estate investment.”
He further explained that specialized platforms such as Fraxtor allow investors direct access to assets, unlike real estate investment trusts (REITs) or developer shares, which are usually in a portfolio or listed vehicle. Tokens also avoid the volatility of stock markets. The minimum investment is higher than REITs, but lower than private equity funds. At Fraxtor, the minimum investment size is $19,500 ($25,000 S), but the typical commitment is approximately $155,500 ($200,000 S).
As one might expect, these sizable investments are geared toward wealthier investors. Allen & Gledhill’s Eng confirmed that, during her tenure at DBS, she saw plenty of appetite for such financial instruments, especially high net-worth people who wanted to spread risk across multiple direct real estate assets. So far, investment in Singapore is limited to accredited investors, with personal assets above $1.55 million ($2 million S), financial assets above $800,000 ($1 million S), or annual income not less than $233,250 ($300,000 S).
“With support from regulators, I hope we could see tokenized real estate investments made available to retail investors, too,” Eng said. “I think the good news is that the regulators are very supportive of this move to allow retail access to the private market space. They will help to build the infrastructure to allow trading of tokens.”
Knight Frank’s Chay emphasized the need for careful evaluation, encouraging potential investors to do their homework. “What do you look for when you look at REITs?” he asked. “There are two things for me: one is the REIT manager, and two is the portfolio, the assets. I think there’s no difference when you look at fractional investment.”
Moderator Seet was interested to know what sort of real estate assets can be tokenized and where investors have been most keen to allocate their capital. Lee replied that while all types of assets in many locations can be tokenized, Fraxtor’s investors tend to prefer developed markets such as Singapore, Australia, the UK, and Japan. He added that residential development is one of the most popular asset types to tokenize, a possible reflection on Singaporean investors being more familiar with that sector as a relatively tax-efficient way to invest in their home market. Most of Fraxtor’s projects, he said, are in the value-add or opportunistic style of real estate investing.
Tokenization can also be used to invest in a private equity real estate fund or a real estate debt investment. Chay suggested that investment managers could use tokenization to raise co-investment capital for individual projects, or even for the funds themselves, as an adjunct to institutional capital-raising.
Of course, there are caveats to tokenization. The two major challenges are liquidity and risk. For tokens to offer true liquidity, investors need a robust and secure platform on which to trade them. Then there are several types of risk to mitigate: technological, managerial, and the underlying real estate itself. The panel agreed that more work by regulators and more education for investors is needed for tokenization to reach a wider retail audience.
Eng said that Singapore’s regulator continues to work on tokenization to “make it more efficient, transparent, with very clear governance, clear legal ownership, and a very active and robust trading platform. That is the objective.”
