The Tallest Building in the World is up for Sale
On 24 Dec 2019, Emaar Properties, the developer of the world’s tallest tower — Burj Khalifa, made an announcement: it plans to sell one of its most valuable real estate assets — Burj Khalifa Observation Deck for an estimated one billion dollars.
At more than 828 meters, the Burj Khalifa is twice as tall as New York’s Empire State Building and nearly three times the height of the Eiffel Tower in Paris.
At the Top — Observation Deck — is a popular tourist destination in Dubai, which attracted 15.92 million visitors in 2018. The viewing decks make about Dh600 ($ 159 million) to Dh700 ($ 185 million) million a year, a banking source said. But finding one buyer for one billion dollars is going to be extremely difficult, especially given the current COVID-19 reality. So how can blockchain help Emaar sell this high performing asset.
Unless you’ve been living on a different planet in the past three years, you must have heard about blockchain technology. In laymen terms, blockchain is the underlying technology that makes bitcoin and other crypto currencies possible. When you send 5 bitcoins to your friend Mike in New Zealand, without using a bank, blockchain makes it possible. Blockchain is the network that can transfer the crypto currency units from your “wallet” address to the receiver’s “wallet” address. The fact that it powers Bitcoin, and Bitcoin has been secure and stable since 2009, is further evidence that blockchain delivers its purpose. Its further proof to the world that the technology is fool proof and that it works.
“Blockchain is the underlying technology that makes bitcoin and other crypto currencies possible. When you send 5 bitcoins to your friend Mike in New Zealand, without using a bank, blockchain makes it possible “
Crypto currency is a type of an application on the blockchain. The same way we know that email is a type of an application on the internet, so is video streaming, world ride web and so on. There is different type of applications on the blockchain such as smart-contracts, and records registrations — each has its own advantages and disadvantages. One of the main applications on the blockchain is called: Token-share ownership. Token share ownership is what made ICO’s (Initial Coin Offering) popular between 2016 and 2019 where we saw a flood of ICO’s being offered to the public. Now ICO’s turned into STO’s — Security Token Offering with a few regulation requirements associated.
Just like owning stock in a company, token-share allows the buyer to purchase a token that represents a share in the real-estate asset. And that token can be sold into a marketplace where other people may be interested in purchasing it.
For the sake of simplicity, let’s say that Emaar wants to sell 50% of the one billion dollars, hence 500 million stake shares. Item 3 in the table above.
The annual revenue is $ 86 million. Hence if Emaar decides to allocate a 1% token share, for example:
The token name is: ECoin, one ECoin = 1% of the Token Share = $5 million token ownership.
Therefore, Emaar would float the Ecoin token share ownership into a token share marketplace — just like a stock market — and buyers from across the world can login and purchase that share. So, if you buy one ECoin, then you would receive yearly revenue of $ 860,000 per year deposited in your wallet address.
Most likely Emaar would be distributing the profits, depending on how they decide to structure the token share. If they do then you as an owner of one ECoin, would receive the profit share of 1% annually. So, assuming the profit is 40% of the yearly revenue: 40% of the 86,000,000 = 34,400,000
Your 1% token share would be: $344,000 per year, deposited in your wallet address.
Naturally, if there are more tourist visitors to the Observation Deck, then your annual profit would increase. If you look at the yearly revenues of the Burj Khalifa Observation deck, there is an annual increase of 15 % in revenues. So overall it is a solid investment for long term growth.
It would be much simpler for Emaar Properties to find buyers for $ 5 million, instead of one buyer for $ 1 billion especially given today’s pandemic reality. And by creating a trading marketplace where people can buy and sell these tokens from anywhere in the world, it would create a massive liquidity opportunity for Emaar. If you think of it, being the owner of a percentage share in the world’s tallest tower’s observation deck is a very attractive asset to have.
The Legal Aspect:
From the legal side, of course there is much to be done. Nevertheless, if Dubai wants to be at the forefront in blockchain innovations, and since they have a national blockchain strategy then by starting to offer it for its most valuable real estate asset would be a giant step in the right direction. From the legal side, the authority that handles land/apartment registrations, Dubai Land Department would need to add new processes to its systems. The process would be to issue Title Deeds for token share real estate assets. So that when a buyer from the UK, goes to Emaar’s marketplace and buys two Ecoin’s which translates to 2% token share ownership, then he would then have to receive a title deed issued by the Dubai Land Department under his name to state and prove his ownership share. Plus, the whole process must happen in real time. The good news is, Dubai is very close to this step, since there is an existing venture that is currently doing this — SmartCrowd.ae. SmartCrowd allows a user to purchase a token share ownership from an assigned apartment which they have listed on their site. They have several apartment units’ listings on their site, and any user (must be based in the UAE) is allowed to make a purchase for as little as $ 1000 to buy a token share ownership in that unit. Then the user would receive the rental rate every quarter deposited into their account.
Emaar Properties would have a better advantage of selling their Burk Khalifa Observation deck using blockchain’s token share ownership approach vs the traditional method of finding one buyer for $1 Billion. By creating a tradeable marketplace, it would allow users from across the world to buy and sell their token share assets in a decentralized fashion. The transaction would occur point to point over a blockchain network, there is no need for a clearing house, a middle man agent to complete the transaction, no bank is required to check and verify, since blockchain handles the entire transaction the same way that anyone can buy Bitcoin.
The token share ownership can be applied to any real estate asset that Emaar owns, not just the Burj Khalifa. So, for example, let’s say Emaar owns a few hotels, and they want to consider selling them, in today’s market that would be very difficult. If they leverage a token share ownership approach, and float it into the market and you or I can logon and I can buy a 2% stake in the Address Downtown hotel, and by the end of the year I get my 2% profit share, that would open the market to global demand of investors.