May 8, 2023

JF3168: Everything You Need to Know About Tokenizing Real Estate ft. Kyle Stevie



Kyle Stevie is the co-founder of Sparen Capital, author of Digital Melting: Making Illiquid Real Estate Assets Liquid Through Tokenization, and senior logistics account executive at Total Quality Logistics, one of the largest freight brokerage firms in the nation. In this episode, Kyle takes a deep dive into the world of tokenization and blockchain technology as it relates to real estate and the benefits this revolution is estimated to have for investors.


New call-to-action

Kyle Stevie | Real Estate Background

  • Co-founder of Sparen Capital, a concierge-style realty service that buys and sells properties through market-driven data analytics and a deep understanding of client needs.
  • Portfolio:
    • One multi-use property
    • Two commercial properties
    • Total value: $7.6M
  • Based in: Fort Thomas, KY
  • Say hi to him at: 
  • Best Ever Book: Tools of Titans by Tim Ferriss
  • Greatest Lesson: Investing and attending all investor calls in 10XTS.


Click here to learn more about our sponsors:

New call-to-action



New call-to-action

BAM Capital


New call-to-action

Deal Maker Live


Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Kyle Stevie. Kyle is joining us from Fort Thomas, Kentucky. He is a logistics account executive at TQL, a co-founder of Spearing Capital, a real estate investment company based in Kentucky that focuses on commercial, residential and mid-sized properties. And he's also the author of "Digital Melting: Making illiquid assets liquid through tokenization." Kyle's portfolio consists of one multi-use and two commercial properties. Kyle, thank you for joining us, and how are you today?

Kyle Stevie: I'm doing great. How are you doing, buddy?

Ash Patel: Very well. And Best Ever listeners, fair disclosure, Kyle and I have been friends for a number of years. Kyle, before we get started, can you give the Best Ever listeners a little bit more about your background, and what you're focused on now?

Kyle Stevie: Yeah, so real estate investment-wise, as you said, I have a mixed use and two commercial properties. In 2016, way back, when I started with TQL, I always envisioned myself transitioning to something else besides sales. So I did law school at night, and then through my temperament and inability to get along with people, I kind of got stuck in the position I was at, because apparently, if you have a really bad temper and you don't take no for an answer, it's not very conducive to working with other people. So I felt like "If this thing doesn't work out with sales - and luckily it has, so far; but if it doesn't work out, what am I going to do with the rest of my life?"

So my wife and I have been kicking around the idea of different streams of income, a) to have something to fall back on, but b) make more money, because who doesn't want to make more money? So we found these two properties up in the city that we live, Fort Thomas; garbage properties, but they were in an entertainment district, and they were this albatross on the neck of this area. They had this renovated restaurant called the Midway Cafe, getting reviews, real positive around the region for their wings, and for the atmosphere... So I knew that they had the anchor tenant, and I felt like if we just could get these properties right, that being right next door to Midway, we were going to have businesses come in and we were going to do very well. We just had to do something that was complementary to what they were doing there at Midway. And that's what we wound up doing. We got them at a real cheap price, because -- I think they be carried out five dead bodies from these things. The woman who owned them died [unintelligible 00:03:05.09] so for five years, they were just held up in probate court. And while they were held up, squatters just kept coming and going...

I'm telling you, if you ever want to take over a country really without sacrificing too many human lives, just dropped some drugs or something behind enemy lines and squatters will find a way to penetrate everything, because locks didn't matter. If you barge the doors or whatever, it didn't matter. They got in. When we started demoing one building, we found a shoe and a dead cat [unintelligible 00:03:33.11] to the floor. This is the weirdest freaking building we're ever going to be in in our lives.

So we've renovated those two. We have a commercial spot, we have this really cool restaurant called Grassroots and Vine. It's not ours, we obviously don't operate; I don't know anything about the restaurant business. But they've done really well. It's kind of become the rich housewives area. Fort Thomas has got a lot of money in it, so a lot of the housewives will go up there and take advantage of their patio, and they have good charcuterie boards, and a wine selection, and stuff that's just too expensive for me.

And then next door to that we have an ice cream shop with two apartments on top, one's a two-bedroom, one's a one-bedroom. And those have done really well. But you know how it is, hanging out with you guys, playing poker, whatever it is... All you guys are talking about all these huge deals you're doing, and I just figured out how to get 64 units under contract. I met the guy -- we stopped at a red light and I said, "Hey, do you invest in real estate?" He goes "Yeah, you want these units?" I didn't have that. So what we did was I got in with my cousin, Joe, who you've met, who's a realtor in Covington... And he's in the young guys group in Covington, so he's in the know with a lot of movers and shakers. And for those that don't know, Covington is right across the river from Cincinnati, and it's booming. It's kind of like the Brooklyn to Cincinnati, for a lack of a better term.

We found this property because we were friends with the architect who was doing the house for the guy who owned the building. And he owns Hotel Covington, and he was trying to do this in addition to Hotel Covington that just opened up yesterday, actually. And he wanted to take advantage of the tax credits from opportunity zones. So he created an opportunity zone fund, and he wanted to get the 15 basis points off of his capital gains that was part of the deal in 2019. I think it steps down 5% every year, or whatever it was.

So we bought the property from him. It's a six-story, on Madison Avenue, which is one of the busiest business districts in all of Kentucky, right? We just kind of lucked into it, but bro, did we get a lot of work to do on that one.

Ash Patel: Let me pause you for a second there... The first two properties that you talked about - one was an ice cream shop at the bottom, apartments above. Do you still own that one?

Kyle Stevie: Yes.

Ash Patel: And cash-flowing, doing well? What was the condition when you bought it? Was that also decrepit, and bodies?

Kyle Stevie: I would put it on the sh***y level.

Ash Patel: Okay, so that was a big value-add.

Kyle Stevie: Yeah. We bought it for $95,000. And I think right about now it's worth about 350k.

Ash Patel: Okay. What was the other property?

Kyle Stevie: It was just a one-story commercial. We bought it for 55k, and it's probably worth about 225k right now.

Ash Patel: You didn't have any commercial experience prior to this, did you?

Kyle Stevie: I had no experience. I've read a book.

Ash Patel: How did you find the commercial tenants?

Kyle Stevie: Lucky, badmouth realtors. But I signed a contract with a realtor, and that guy didn't do s**t. He took two pictures [unintelligible 00:06:18.24] put into the ice cream shop, and I asked him -- it's like literally located three blocks from [unintelligible 00:06:26.27] I said "Pease walk down the street, take new pictures with the updated facade. Please. Because what you have now, nobody's gonna look at." He wouldn't do it. But surely, since we signed that tenant, [unintelligible 00:06:38.16] a demand, like "You owe me my commission right now." I was like, "You didn't do anything. I did the leases myself."

Ash Patel: By the way, they're gonna bleep out all your cursing.

Kyle Stevie: That's fine.

Ash Patel: Which is fine, but just know that.

Kyle Stevie: I won't curse anymore, sorry.

Ash Patel: This is not the Kyle Stevie Podcast that you do with --

Kyle Stevie: Oh, the Side Hustle City? [laughter]

Ash Patel: I don't care if you curse, just keep that in mind, how it comes across when you're getting bleeped. Just make sure you don't lose any content from doing that.

Kyle Stevie: Alright.

Ash Patel: Okay, so you realized the realtor wasn't going to get it done for you. How did you learn that tenant?

Kyle Stevie: The ice cream shop - like I said, we got lucky. We were at a church festival, and one of the members of our parish was there, and they discussed wanting to open up an ice cream shop, and the husband had been making his own ice cream into their basement for years... It was actually really good. So it was like "Alright, we'll give you a shot."

In this area you can't charge a premium price per square foot. You just can't. It's a bedroom community, it's not a big business area. There's not people knocking on your door to get in here.
So we rolled the dice with him. The Grassroots and Vine, I was on the design -- not the Design Review Board, but... Every city has to do a 10-year planning thing; I forget what committee I was on... One of the ladies that was part of it stopped me after and she said "Hey." She owned a consignment shop in the middle of town. She said she had this idea for what she wanted to do, which was going to be like a restaurant, but you could also buy like boutique wines, because she was from North Carolina, so she connections with local wineries there, and had this really good popcorn... Honestly, a really cool setup that she wanted to do. And I said "Well, we don't have anybody else, so come on along." And, man, she did a great job.

Ash Patel: Good. Alright, and now your third property.

Kyle Stevie: Yes. This was our proof of work. I call this my "Thank you, Joe Fairless, for making me take a risk on something that I didn't think I was possibly able to do." Because I joined his old mastermind group, where you were his student, you went through the classes, and stuff... And I was getting right at the time that people were getting hip to Cincinnati, Northern Kentucky, and so we were getting a lot of West Coast investors. So as a multifamily property was coming on, you were competing with these guys that were willing to overpay to get a five cap, in a seven cap area. I couldn't do it. I just couldn't figure out a way to pull that trigger.

So we figured out with that building in Covington, that we could do it, and then we got a group together, we sold five shares, we syndicated one of the shares, and we only raised 780k. So it wasn't like it was a crazy raise. So that's where we're at now, just getting that thing up and running.

Ash Patel: A $780,000 raise on - what was the purchase price?

Kyle Stevie: The purchase price was 2, and then we had to put another 2 in it.

Ash Patel: A $2 million renovation. So this is a building -- and I've seen this; it's a beautiful old building. It looks like an old office tower. How many stories does it have?

Kyle Stevie: It has six, and then we're putting a rooftop bar and restaurant. So we're renting seven floors.

Ash Patel: Yeah, all commercial, no residential.

Kyle Stevie: Yeah, all Class A. So far everything has been triple net. We're getting a percentage of the gross sales of the restaurant, and then we're going to step it down as we pay off some of the tenant improvements that went over what we were allotting.

Ash Patel: Alright. Now, you sound like a savvy commercial real estate investor. How did you know how to deal with tenant improvement, TI, and how did you know to ask for part of their gross sales?

Kyle Stevie: Well, this is where being around people that know what they're doing is crucial. So Joe does this for a living. He negotiates tenant leases. So he wrote it, he did everything with it.

Ash Patel: Good. How far are you away from getting this building up and running?

Kyle Stevie: I'd be lying if I told you, because every time I say it, I push it back by six months. So we have a bank on the first floor, we have a law firm on the fifth and sixth floors right now. The restaurant will be open by the end of June. I've been up there; I finally feel like it's actually gonna be open by the end of June.

We have a data company on the fourth floor, and we are just waiting for the second and third floor, which I think will pretty much lease once the restaurant's open, and they see how much foot traffic is coming that way. A big holdup with us was that our elevator in the building - I told you about this - wasn't ADA compliant. It was put in when the building was built, in like 1908. You and I couldn't have been on there comfortably, let alone a gurney that would have to go up there if something, God forbid, happens in one of the offices.

We have a service elevator, but it only goes to the fifth floor. So we had to take out the whole shaft, put a new shaft in. When they decided to do a restaurant as opposed to just a bar, we had to put storage in the basement, so we had to underpin the foundation there... And the machine room was going to be in the basement, but we had to get creative with that with our engineers.

Ash Patel: Explain that to me again... You had to underpin the foundation - why?

Kyle Stevie: Because it has a basement, but where the slab was at, we were going to dig actually deeper, as opposed to just having the machine room right there, and having it stop on the first floor. We had to take it all the way down into the basement; the shaft had to go a little bit deeper.

Ash Patel: What did that whole elevator debacle cost?

Kyle Stevie: Well, here's another thing you're gonna learn if you have to deal with elevator companies. There's only four of them. Customer service isn't exactly a top priority, because as soon as one company starts working on it, nobody else is going to take on that liability. So if you have a service call, you've got to go with the provider. So that held us up about three months. So the actual cost of the whole construction was right around 385k-400k. But loss leases was probably about four months...
Ash Patel: Kyle, this building was fully vacant when you bought it.

Kyle Stevie: No, it had two tenants. It had the bank, and then it had another group that was on the fifth floor, and they were all older guys. So once the elevator went out of service, and they had to walk up the flight of stairs, and all the noise, they got out as soon as they could. They did not want to be part of the reconstruction. I don't blame them.

Ash Patel: What else did you spend $2 million on?

Kyle Stevie: Well, we had to have fire exits; so we have stairs that go all the way up to the roof now. We had [unintelligible 00:12:28.08] for the tenant improvements. We have brand new windows all through the building, brand new systems... Basically, the whole building is brand new, except for the outside.

1:Alright, I want to deep-dive into this property. We're gonna have you back if you're okay with that, because you're making this seem easy, but I know this has been going on for how many years?

Kyle Stevie: We had bought in 2019 the building itself. We didn't get the construction loan until April of 2020, which was right in the heart of COVID. So we've had it three years now.

Ash Patel: Alright, we're gonna come back and do a deep-dive on this. But let's move on to - how did you become an expert in tokenization of real estate and blockchain technologies?

Kyle Stevie: Okay, so this was completely accidental. I was really into crypto when I first was introduced to it, right when everybody else was, when Bitcoin went from $5,000 to $15,000, it seemed like almost overnight; like over two months stretch, or whatever, in 2017. So I went to an event that was held here in Cincinnati called Day for Crypto. Adam Koehler is my co-host on my podcast, Side Hustle City, but he was the one that got this together. How he pulled this together in like four days is amazing, because he flew in people from Europe, and all over the place.

But I was listening to a lot of the pitches, and the theory, and all this other stuff, and I was like "This doesn't make sense. Well, this kind of makes sense. I can see how this makes sense. This is bull***t." And then in the middle of it, this guy [unintelligible 00:13:55.09] started talking. And he just seemed to have a much firmer grasp on what the future held for blockchain itself, as opposed to everybody else there. Everybody else was speaking like unicorns and rainbows, and we're all going to get rich. And he was like, "That's not going to happen for over 95% of these guys." This is where I see blockchain going.

After that was over, we had a meet and greet. I met Adam Koehler, and I met the guy in the [unintelligible 00:14:19.07] Michael Hiles, who's the CEO of 10XTS, and we just had a one-off conversation, no big deal. I got invited to go to the Crypto Valley, whatever they used to call it, crypto meetup in Cincinnati, at Union Hall. And the third meeting I think Hiles came down, he came into the room, kind of like the legend [unintelligible 00:14:37.04] competition; he's kind of looking at everybody, and sizing them up, and he's like, "Who's gonna come in second?" Well, Hiles was like "You guys realize that all of these guys are gonna get [unintelligible 00:14:47.12] for trading securities, and it's completely illegal, and they're either going to get a cease and desist until they have to change everything they're doing, or they're going to have to close up shop?" ...if they even get to that point, because most of these guys were just throwing out like a marketing white paper, and then they were releasing a token, and beating everybody to the market, and making millions, and then you never heard from them again.

So with my legal background, I thought, "This guy makes way more sense. This is exactly how I feel about it. I'm just not comfortable with what these guys are throwing out here." So I'd listened to -- Hiles gave his presentation the next meetup, and it was about tokenizing municipal bonds, and about the efficiencies in settlements that you could get through using smart contracts on different permission blockchains, so that you could conduct these trades that the SEC would be okay with, and that municipality could go from having a 35% overhead for a municipal bond release, to 5% overhead. And that if you didn't want to hold 10 years till the bond matured, you would have a marketplace for it. And I felt like "You're years away from this. People are not going to do this very soon... But that makes perfect sense." Well, fast-forward to COVID...

Ash Patel: Kyle, let me just see if I understand that... The premise of that was when a municipality wants to issue bonds and raise capital, they have to probably go through a Wall Street type company that takes a third of the money raised as their fee, so to speak. And then once those investors buy the municipal bonds, there's not liquidity on the secondary market. Is that right?

Kyle Stevie: Not to my knowledge, there wasn't.

Ash Patel: Okay.

Kyle Stevie: But that's part of the reason why I wrote the books, because I'll be honest with you, I didn't dive as deep probably as I should have. I dove deep, but I didn't 100% understand everything.

Ash Patel: Okay. And listen, I understand way less than you do. So he initially set out to solve a problem.

Kyle Stevie: Yes. To provide liquidity where no liquidity was currently at.

Ash Patel: Got it.

Kyle Stevie: So they took that and they pivoted during COVID. That's when the start of this idea of the secondary markets for private assets was really starting to come to fruition. People were understanding that a lot of states were starting to put together committees, to understand blockchain and smart contracts, and this whole idea of trustless settlement, and how you could program in things like disbursements to shareholders; you could program in settlements between a settling broker and a custodial bank. And once they started talking about that, you have a trillion dollar market, or whatever the bonds were; you have all of these assets that are privately held. You're talking like mineral rights, you're talking private equity in companies, you're talking your equity in a real estate property, artwork; everything that you invest in because you feel like it's gonna depreciate in value, but you can't get out of it unless you sell it. And the idea that all you have to do is link together all these different broker-dealer sites that we call it alternative trading systems, and link them together and make sure that every trade's settling properly and you're following all the SEC is protocols, that you're going to be able to get out of a deal that you don't want to be in, or you can buy more.

And once I start getting into it even more, I was like "Oh my God, depending on your offering--" but most of us in private are doing exemptions, 506(c), crowdfunding, Reg 8 Plus, or whatever you're doing - you can now sit out that six months, and then you can list your shares, your equity on these sites, trust that it can be traded across these different ATS, just like a traditional stock market, and you can sell to people who are shut out right now. If you're not an accredited investor, you don't get into any of this fun stuff.

So this was going to open up a whole new basically market participation, because now accredited and non-accredited investors are gonna be able to get into a real estate property, or whatever, six months after it's been listed. And you're gonna get a tremendous part of the upside, as opposed to trying to get into an IPO. IPOs last three years, or whatever; too many of them have been pretty much garbage; like, you get in, but all the value is gone, because they've gone through a Series A, B, C, D, E, F, and all the value that was accumulated has already happened. So then you're back to 8%, 10%, as opposed to 8x, 10x. That's the theory anyway.

Ash Patel: So you've been living in this world for a long time, and I'm literally trying to catch up and understand what's coming out of your mouth. So yes, real estate investments are very inefficient, because especially syndication investments, if I invest in somebody else's deal, I am at the mercy of whenever they sell the property before I have any liquidity, before I can get my money back. There's times where in certain situations you can sell your shares back to the operator for a huge discount... But other than that, I can't get my money out. And even on my own investments, my own real estate purchases, until I sell the property or do a cash-out refi, there's no way to really add liquidity to those investments. And because of that, those markets are inefficient, they're not priced like capital markets.

This morning everybody knew the price of Ford Motor Company was whatever it is, because the trades happen so often. So with what you guys are doing, it adds liquidity, makes markets more efficient, adds real-time value to these properties. Is that right?

Kyle Stevie: Yeah, what you said was correct, except for the part with what we're doing. So what they're doing is they don't carry --

Ash Patel: Explain to me the we and they.

Kyle Stevie: They is 10XTS.

Ash Patel: Okay, got it.

Kyle Stevie: What they're doing is they don't care who owns what, or who trades on what. They're gonna keep you compliant with the SEC. Here's a perfect example. The St. Regis in Aspen, Colorado did an $18 million renovation. And they tokenized that $18 million. They used tZERO as their broker-dealer site. They're using their ATS. You can go to it right now and you can look at it. Actually, they just signed a new deal with someone else to provide an even larger marketplace, so they can provide more liquidity, because right now, since nobody really knows what's going on, and the ATS is aren't linked, you don't have much market participation. You don't have any liquidity. But you can go there and you can buy a piece of the St. Regis right now, if you want. You're buying a piece of the special-purpose vehicle that owns that part of the equity of St. Regis, but just like you would do with a syndication, you don't own one 650th of the building, you own one 650th of the company that has taken possession of the building.

Ash Patel: So it's like buying a paper stock certificate versus an electronic trade on AmeriTrade.

Kyle Stevie: Yes, that's exactly what tokenization is. It's just the digital representation of your ownership interest. Everybody's gotten so confused because of crypto. In crypto you don't have any equity in most of these companies; you have a token. A token doesn't give you any ownership of the company; you can just go and trade it on Coinbase or whatever, and hope to God you catch the right thing. This is actually a real-world thing. So if you don't even want to do this, you just offer it like you would do traditionally, you pay out your dividends or whatever you're paying out quarterly or monthly or whatever, and then when you sell the property, they get whatever your deal is at the end of the property, they get their 2x or whatever overall... But this - this permits you to have the best of both worlds; you are able to have that part of it, just like you do right now, but you're also able to get out of it earlier if you need to. Because something happens all the time. So if you have a medical emergency, and you're like "Man, I really could use a few thousand dollars [unintelligible 00:22:28.15] to be part of this apartment community in Dallas", you can take $50,000 and you can list it on the ATSs, and then they can trade it across the different ATS, and then 10XTS will work with a settling broker and the custodial bank, and they'll have the transfer agent to settle the ledger, and everything will be up to date right away.

Ash Patel: So Kyle, these ATSes are essentially marketplaces to trade your tokens.

Kyle Stevie: Yes, they have to be created by a FINRA-registered broker-dealer. So the one that I use, just because I've met the guy who owns it, is Templum. They seem to be a market setter. They're very aggressive with bringing things onto their ATS to be able to be traded there. But yes, that's right.

Break: [00:23:18.23]

Ash Patel: Are these ATSes complimentary or competitive, in that do they talk to each other? Or do they try to be the biggest, baddest first?

Kyle Stevie: See, that's another problem with liquidity, is that they're kind of like walled gardens. And as it is right now, you can only go to the specific site. So their competitors. Once they have the comfort and realizing that once trades occur, and they're settled properly, they don't have to worry about hiring hundreds of thousands of dollars worth of lawyers later, because a trade got duplicated on a different ATS, then I think they'll start talking to each other and realize that rising tide lifts all ships. But as of right now, yeah, they're competitors.

Ash Patel: Okay. And then how is it that non-accredited investors are able to get into investments that otherwise were only open to accredited investors?

Kyle Stevie: Well, that's the deal, is that you can sign up; you don't have to be an accredited investor to do it, so like Fidelity, or Charles Schwab, or anything like that; you just have to give your information and your social security number and set up your account, and then you can trade from there.

Ash Patel: Interesting. So are these no longer considered securities?

Kyle Stevie: No, they're securities. They tripped the Howey Test. And the Howey Test was created in some sort of Supreme Court case back in the '20s, or '30s, where - basically, the premise is this... It's that if you have a company, and you need investors, and I give you money with the idea that I'm not going to do any work, I'm not contributing to the improvement of this asset whatsoever, but I demand that you give me a return for my money, then that is a security. And that's the problem that a lot of the crypto companies were running into, it's because they couldn't define whether what they were offering was a security, or was it a commodity... So they were running on whatever their legal status was, and then come to find out later on that the SEC interprets it completely different, or the Commodity Trade Commission, they think it's a commodity, so you've got to play by their rules... This is just a traditional security; you know exactly what you're doing, what you're getting into. The only thing you're doing right now is making settlement more efficient. You're taking a lot of the friction out of the settlement part of it, and you're providing an opportunity to get your money, or increase your holding, without having to go through another batch of legal documents to fix the holding, the ledger, or whatever.

Ash Patel: Understood. So it's almost like trading shares in a REIT, versus a syndication.

Kyle Stevie: Yes. They do this with public REITs now. But the issue with public REITs is that there's a lot of legal steps you've got to take; you have to pay dividends, you have to [unintelligible 00:27:50.27] that you have registered with the SEC, and you're talking about hundreds of thousands of dollars more than just an exempt offering. That's why most people with mid-sized offerings are going to be exempt, because they don't want to deal with the overall burden of having to pay to be a publicly-traded company.

Ash Patel: Understood. Kyle, I interviewed somebody just a few days ago, and they're in a similar space. They told me that the SEC basically took a bazooka to this whole industry, and reset everybody. Now they have to go back to the drawing board, because of compliance and all that. Can you help me understand what the hell happened?

Kyle Stevie: Yeah, so I think we were talking to the same guy. So what happened is properties have been tokenized for the last four or five years. But they've been issuing their tokens on what are called the public blockchains, layer ones. So what happens is that whenever you have a trade or whatever, the settlement has to be approved by the nodes, the computers that are on the system; they'll say, "Yeah, this is a legit transaction." The issue with nodes is that you don't know who owns the node, and who's going to benefit from the fees that they charge for verifying transactions.

So you can have some sort of Russian or Ukrainian mobster that owns four or five nodes for different tokens on Ethereum, for example, and you're basically paying these guys, when they shouldn't be able to make money off of it. You potentially could be contributing to money laundering... And it's all really just BS for the government to make sure they're getting their taxes. But that's what they're saying.

So what happens is that any bank that is partaking in this, whether they're financing the project or whatever, [unintelligible 00:29:30.12] any trades going through with a public, layer one blockchain, and the nodes maintain the anonymity that they have now, which they all are going to want to have anyway, that any of those trades are like subject to some major crackdown from the banking regulators. So what's going to happen is that you're gonna wind up having to be private permission blockchain, which most financial institutions are going to be more comfortable with anyway. You don't want your customers' information on Ethereum. You want it where you have possession and control, and make sure that nobody's cracking in and getting access to information that they shouldn't be able to get access that information to. That's the way it's been explained to me anyway.

Ash Patel: And the solution to that is having a controllable private blockchain, where you know all the nodes.

Kyle Stevie: Yeah.

Ash Patel: But there's no anonymity, at least.

Kyle Stevie: There's no anonymity. Right.

Ash Patel: Who's developing that? Is that a thing right now?

Kyle Stevie: Yeah, you know who's developing that. [unintelligible 00:30:29.08] is developing that.

Ash Patel: Are there multiple companies developing that?

Kyle Stevie: Not many. Everybody was taking the path, because they thought that the layer one on Ethereum was going to be okay. And now that is not, there's like three or four competitors right now that are handling layer two, but it's expensive. You've got to deal directly with the SEC; you've got to know exactly what you're looking at. You've got to pay the legal fees. You've got to give them the documents that they want and make sure that you're fixing whatever they're asking for. And is still not even set in stone. This is something that's like four or five years away from mass adoption.

Ash Patel: So when we trade our crypto on Coinbase, that uses the public layer one blockchain.

Kyle Stevie: Yes.

Ash Patel: And whenever anybody references that immutable ledger on the blockchain, it's one public blockchain.

Kyle Stevie: There's a few public blockchains. Ethereum is the one that most people use, because Ethereum has made it very easy to build off of their blockchain. And then you can do your own tokens off of that. They're all ERC-20 tokens. Coinbase is just an exchange for you to trade. But most of those tokens that you see on there were created on Ethereum. Bitcoin's got its own, Ripple has its own... I haven't really paid attention to crypto very much lately, just because I felt like the real world assets, tokenizing them was the future.

Ash Patel: Okay. I'm trying to wrap my head around this. So we're going to start seeing private blockchains that can be used for specialized purposes. Tokenizing what are considered securities today. And adding liquidity to real estate markets.

Kyle Stevie: Yes. It's going to start with real estate my opinion, but it's going to every private asset. Larry Fink just had a big thing on it... Chase Bank had a big article on it... It's happening.

Kyle Stevie: Kyle, when I think about liquidity and tokenization for US-based real estate assets, I think "This would be awesome, because a lot of foreign investors that want exposure to US real estate - there's no easy way for them to do that now, other than syndications, and maybe coming out here and buying their own real estate." Now I can sell tokens of my real estate all over the world. Are there any regulatory issues with accepting foreign capital?

Kyle Stevie: It's going to be the same way as it is right now. Whatever country, I guess, is not allowed to participate in our marketplaces, if you're a citizen of that country, you're out. You've still gotta do your KYC and your AMLs. So this all sounds super-complicated, but for the person that's transacting in it, just like the layperson, it's going to look exactly the same. It's just not going to be like New York Stock Exchange, or NASDAQ; you're going to just go to whoever your broker is, and you're going to just do it from there. But that helps.

Ash Patel: It does. And in theory, it should add a lot more investors into US real estate. So the byproduct would be US real estate prices, because of the lack of supply and increased demand, should skyrocket.

Kyle Stevie: Yeah. Another theory that goes along with that as well is that public REITs - they have this liquidity premium that investors don't charge. You're able to just trade your shares, or whatever, after your holding period, if you want to get out. The private real estate holders - you have to pay your investors more in terms of return, because they're taking a larger risk. So the idea is this is going to compress the interest that you're going to be expected to pay out to your investors. So you should be able to make more money in that regard as well.

Ash Patel: Kyle, on that note...

Kyle Stevie: [unintelligible 00:34:02.01]

Ash Patel: ...I know you've got to run. Tell us about your book. Where can we get it?

Kyle Stevie: You can get my book on Amazon in eBook form, or just paperback. It's in Barnes and Noble, it's at all major book suppliers. It's called "Digital Melting: Making illiquid real estate assets liquid through tokenization." The title is basically about as long as the book. It's only something like 150 pages or something like that, in big bold print, because it makes it easier to read. It's just an introductory book. It starts with what is blockchain, and it ends with how you go about tokenizing your equity share and special-purpose vehicle and all the steps you have to take.

Ash Patel: The book's been on my desk for weeks since it came out. I should probably read it. I should have read it before --

Kyle Stevie: I have yet to meet somebody read it all the way through. There's just too much; it's like "Man, it took me three years to write this thing to compress it down to like easily-understandable information, as I saw it", and then I was like "Nobody really understands what it is yet", so I guess why it's so hard for everybody to read. I do like the tone though, because they said it's like how I speak.

Ash Patel: Yeah, I read your manuscript as you were writing it, and it was a very simple, easy read; it explains a lot of this stuff in layman's terms. Awesome, Kyle. We need to have you back, deep-dive on the $2 million renovation on a $2 million building. Let's do that, alright?

Kyle Stevie: Yeah. Thanks for having me.

Ash Patel: Awesome. Thank you guys so much. Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five star review. Share this episode with somebody you think can benefit from it. Also, follow, subscribe and have a Best Ever day.

Website disclaimer

This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.

The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.

No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means. 

Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.

Oral Disclaimer

The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to

    Get More CRE Investing Tips Right to Your Inbox