Blockchain In Real Estate Use Case #11: ProjectFRED

  • 25 August 2019
  • Emilia Picco Emilia Picco

This interview is part of our new Blockchain In Real Estate series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and real estate.

In this interview we speak with Heather Martel, COO of ProjectFRED, to understand how this company is using blockchain to transform the real estate business, and what the future of the industry holds.

Heather Martel

1. What’s the story behind ProjectFRED? Why and how did you begin?

HM: One day a neurosurgeon turned blockchain coder, a marketer and a real estate broker walked into a coffee shop and started discussing how blockchain would soon be transforming the world, eliminating inefficiency and centralized data control. At the top of their list of complaints was a $100 million real estate portfolio in Ann Arbor that was struggling to be sold using traditional methods. The three brainstormed, drank gallons of espresso and after two months of strategic research, intense blockchain coding and blue sky thinking ProjectFRED was born.

While attempting to transact the $100 million dollar portfolio, FRED team members came across several problems such as lack of liquidity, proof of funding, bank deadlines, broker circumvention, property valuation, property management, title transaction costs, and lack of transparency which all made the transaction extremely complex. These problems led to the first conversations on how to increase transparency, validate funding, offer alternative purchase options, produce the highest possible capitalization rate AND create an open exchange market for fractional portions of commercial real estate.  FRED created the solution.

2. Please describe your use case and how ProjectFRED uses blockchain: 

HM: ProjectFRED revolutionizes commercial real estate in eight key ways:

Ease of Transaction– The Smart Contract is a trustless mechanism which eliminates the need for redundant and expensive paperwork. Antiquated models of real estate and the need for numerous signatures are removed from the process. The Smart Contract will revolutionize the transaction instead of just digitizing it.

Identity Security– Project FRED creates a Security Token Offering (STO) that provides completely secured fractional ownership investment vehicles. This investment strategy extends the opportunity for a higher initial sale price and offers investors a greater return. FRED uses Civic Secure Identity Ecosystem for full AML/KYC compliance, ensuring the validity of every investor.

Investor Database– The FRED platform will house a substantial collection of verified investors, waiting for the next investment opportunity on the ProjectFred platform. Property owners and brokers will no longer need to send hundreds of emails hoping to find the right buyers.

Transaction Document Security-Smart Contracts will be embedded on the Ethereum Blockchain, making transactions immutable and permanently on record.

Smart Contract Escrows– Smart Contracts automate escrow transactions, eliminating the potential for human error or lack of funds. Smart Contracts will also execute transactions and remove the need for trust in a third-party system.

Immutable Ledger– Utilizing Distributed Ledger Transactions, FRED ensures that all data is stored in an immutable ledger that is forever traceable.

Stablecoin Payment Option– Project FRED smart contracts are designed using the PAX Stablecoin, which is backed by the US dollar. This removes the risk of wire fraud, which amounts to over $1 Billion a year worldwide (source: Business Trial Group).

FRED Exchange– Think NYSE meets commercial real estate. Tokenizing physical assets allows direct exchange, providing a massive revenue opportunity for both FRED and users.

3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?

HM: The benefits of using ProjectFRED are simple:

1. ProjectFRED is democratizing commercial real estate by enabling people to buy shares of each property instead of the whole or having to find their own investors (eg we’re like a dating app for anyone with dollars to invest in commercial real estate). We match buyers with other buyers and buyers with sellers. Think of us like “Tinder” for commercial real estate deals.  FRED brings together groups of people to buy properties.

2. FRED provides liquidity for REITS.

Using FRED to sell your commercial property cuts down on legal fees/brokerage fees by collecting 10 friends and going in on a property by a do-it-yourself LLC/REIT model. ProjectFRED busts through the traditional investment model by providing the opportunity for commercial Realestate investment to EVERYONE! 

It's like Fundrise…making real estate available to the masses but with more decentralization with built in liquidity and trading opportunity. 

Each property will have its own token.  Example: 1234MaidenLane, abbreviated 12MDL.  Each property will have a specific allotted number of tokens.  The fictional property below has 10 tokens that represent the 12MDL property. Four people currently “own” the property.

Person 1: 60%

Person 2: 20%

Person 3: 10%

Person 4: 10%

Each owner holds their tokens in their private digital wallet. 

ProjectFred is working on the completion of the platform and exchange.  We anticipate a November 2019 completion date. We are currently under contract with an Ann Arbor commercial property owner. The ProjectFRED team is excited for the completion of Proof of Concept before the end of 2019. 

4. What other blockchain use cases in real estate are you excited about?

HM: There is a great deal of opportunity for innovation in multiple areas of commercial real estate.  ProjectFRED is tackling several areas of need for innovation but there is still a great amount of opportunity for innovation in other areas.  One simple yet important area that is needed is in the title work space. There is a need for all current title work to be uploaded onto the blockchain. This is a massive undertaking, but once completed, will never need to be re-evaluated due to the immutability of the blockchain.  This is a project that would be of great benefit to ProjectFRED and other CRE Tech companies.

5. Where will ProjectFRED be in 5 years?

HM: In five years, ProjectFRED will be home to millions of verified commercial real estate investors. The ProjectFRED platform will list over 1000 new properties annually and will be the TOP trading platform for over one million tradable asset-backed tokens.  ProjectFRED will employ over 250 developers, operations specialists, analysts, and consultants AND will donate 5% of all annual earnings to a non-profit that provides scholarships for tech development training for single parents.

Emilia Picco
About Emilia Picco

Emilia is the Managing Editor of Disruptor Daily and has been with the team for over two years now. She has a deep passion for technologies that will reshape our world and has interviewed many of the world's leading thought leaders. She lives in Argentina and as expected, is a wine lover.