31 Jul 2019
This article originally appeared on Sparefoot.com
Is the self storage industry ready for blockchain technology? Texas-based Pinnacle Storage Properties is betting that it is. The owner-operator is both a founding partner and one of the first sponsors to commit to listing its assets on the Earn.re fundraising platform, which is set to debut later this fall.
Like many growing companies, Pinnacle Storage is always on the hunt for equity. Pinnacle Storage CEO John Manes spearheads those efforts for the company. In fact, the firm has raised about $72 million in private equity over the past three and a half years to fund acquisitions and value-add improvements to assets.
“What excited me about this was the ability to raise capital quickly on a platform that saves me a lot of time, energy and effort,” says Manes.
The simple explanation is that Earn.re is building an online platform that allows sponsors to raise capital for projects by dealing directly with capital providers. The platform is built on the Ethereum public blockchain, which provides users with a secure means of investing in U.S. commercial real estate with full transparency and in compliance with U.S. securities and data privacy laws.
One simple way to think about blockchain is that it represents a giant digital ledger that stores transaction documents such as property deeds, mortgages and shareholder agreements.
“Essentially, we are not changing the way (accessing capital) is done, but with the blockchain we are enhancing the way it is done,” says Earn.re CEO Aaron Lohmann.
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The tokens are backed by crypto currency, in this case the Circle Stable Coin, which is the equivalent of $1 US dollar. After money has been contributed to a project, an investor would hold those tokens in their own personal “crypto wallet” held on the Earn.re platform.
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Some in the industry believe that blockchain has the potential to redefine how commercial real estate transactions are done.
“What is exciting to me as an investor is that it makes each individual asset liquid, just like a stock,” says Manes.
Pinnacle Storage, Earn.re is negotiating with a variety of other commercial and multifamily sponsors who are interested in putting projects on the platform. According to Lohmann, the company was approaching about $300 million in committed projects as of mid-July.
Pinnacle is currently assessing assets in its portfolio, which currently spans about $100 million in facilities, to determine which would be good candidates to put on the platform to make them liquid. The company would need to get an approval vote from current investors before listing assets on the platform.
“Even if we could put half of our assets on the platform and perhaps another half of the assets that we buy in the next year, it’s a homerun to us,” says Manes.
