Downtown Miami’s WeWork building and a 469-unit apartment development on Florida’s Gulf Coast soon will be open to investors — including those trading in cryptocurrency.
It’s an innovative offering that allows investors to buy limited partnership interest in projects and tokenizes their ownership. Unlike traditional offerings, proof of ownership is a token, and investors can trade it for dollars or cryptocurrency.
“This is brand new in capital markets transactions where the actual data is maintained electronically,” said Pat O’Meara, who leads the New York company offering the investment. “The way people evidence that ownership is through that token in their wallet. Their token represents their ownership, but anything that comes to them, we will pay them in dollars or if they want a different currency, they can get paid in cryptocurrency.
Inveniam Capital Partners is seeking $270 million for four projects. It plans to hold an auction giving cryptocurrency bidders three hours to submit blind offers. The auction date has not been announced.
Few commercial real estate deals have been done this way and even fewer on this scope. Holders of Bitcoin, Litecoin and other types of digital money can put their funds into a hard asset, said O’Meara, chairman and CEO of debt capital markets firm Inveniam.
Two Fort Lauderdale attorneys, however, advised a cautious approach, especially in light of the novelty and past occurrences of cryptocurrency fraud.
“It’s hard to be the first to market, and this is one of the first and largest projects that is trying to tokenize real estate and infrastructure investments. Until I see regulators and institutions investing without problems, I am going to be slow to endorse the investment platform, and I continue to be hesitant in my recommendation,” said David Silver, a founding partner at Silver Miller. “I am more cautious than not given what I do for a living, especially in the cryptocurrency space.”
He noted “fad investing” hurt some early cryptocyrrency investors. citing a BitConnect class action.
Jesse Fulton, an attorney at Krupnick Campbell Malone Buser Slama Hancock, said he would suggest coming in “very, very, very cognizant of what you are entering into.”
Still, there are aspects of the Inveniam offering that speak well of it, Fulton and Silver added. For one, the company is publicizing rather than hiding its offering.
The minimum investment is $500,000, which generally limits it to institutional investors, Silver added.
“I am happy to see that this is happening because I want sophisticated investors who understand how to do due diligence into projects like this to be the ones starting out the investment process,” he said.
Inveniam, which has done several smaller cryptocurrency deals, will be the general partner in each project, where cash also is an option.
Inveniam has the 96,575-square-foot historic Miami tower at 117 NE First Ave. fully leased by WeWork under contract to buy it from Security Building AR Owner LLC.
“What we are doing now is we are going to get partners who are going to help us close that deal,” O’Meara said.
Dade County Security Corp., an early 1900s savings and loan, developed the building in 1926 after demolishing a hotel to make room for the 17-story tower in response to an uptick in demand, according to Miami-History.com. The Security Building name was inscribed on the building, which was added to the National Register of Historic Places in 1989.
Inveniam is seeking $65.5 million covering the $61.65 million purchase price and $3.85 million for associated transaction costs and potential emergency maintenance.
Inveniam also is seeking $75 million for the development of a 469-unit multifamily community on Florida’s West Coast. Some of the funds could be leveraged to build two more multifamily projects, O’Meara said.
“Once you have one up and running, you have the ability to utilize leverage and add leverage onto the trade so you can do up to three transactions,” he said.
Inveniam and North Dakota-based developer Roers Development LLC will be the general partners. The investment breaks down to $50 million in debt and $25 million in equity, or $160,000 per unit. That’s how much it’s costing Roers to build another 320-unit project in Cape Coral.
Inveniam also is looking for $80 million to buy three student housing projects from Roers in Fargo. The projects, which mainly serve North Dakota State University, are the 233-unit, 420-bed U32; the 180-unit, 359-bed T Lofts Apartments; and the 75-unit, 138-bed SGC Apartments. Roers intends to continue managing the properties.
In its fourth offering, Inveniam is seeking $50 million to refinance existing debt and help pay for the 19-mile expansion of a Williston, North Dakota, water pipeline.
Inveniam is making a de minimus investment in the projects, O’Meara said.
Once bids come in, Inveniam will convert the tokens to cash through Grapefruit Trading, which provides liquidity for cryptocurrencies, and invest in the four projects. The investors’ stake is tokenized, leaving proof of ownership in a digital wallet.
“This tokenized interest will be sent back to their wallet. That’s an about a 15-minute process,” O’Meara said.
Manuel Crespo, Inveniam’s attorney on parts of the transaction, said the offering will be a good deal for investors who get “two bites of the apple.”
Funds go into a stable, income-producing asset, then investors can sell their tokens at a favorable exchange rate between cryptocurrency and dollars, said Crespo, a Greenspoon Marder partner in Miami.
O’Meara said this type of offering might make investing more accessible to people who want to invest but don’t have access to institutional investments. He hopes this structure eventually could connect borrowers with investors in off-the-beaten-path places.
“Think all through Middle America, think Central and South America, think Eastern Europe, places where debt is mispriced because their connectivity to big money centers is less,” O’Meara said. “That’s what this is setting the table for.”