Joe and Chris are teaming together to make real estate investing easier for everyone. Using Blockchain technology, they have digitized a lot of the intermediary pieces and even automated a lot of it. You’ll just have to listen in to understand what I mean. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Joe Snyder Real Estate Background:
Successfully initiated, built, scaled, acquired, merged, and exited multiple companies over the last 15 years
Built his initial wealth investing in real estate
Based in Phoenix, Arizona
Say hi to him at https://www.lannisterholdings.com
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Joe Snyder and Chris Brown from Lannister Holdings. How are you two doing?
Chris Brown: Awesome, man. Thanks for having us on, and great to meet you.
Joe Fairless: Yeah, my pleasure. Nice to have you both on the show. Your company, Lannister Holdings – well, Joe, I know you successfully built, scaled, acquired, merged and exited multiple companies over the last 15 years, and you initially built your wealth in real estate, so why don’t we first start talking about your background and your focus, and then that will lead us into Lannister Holdings?
Joe Snyder: Sure, absolutely. Chris and I both have been real estate investors. Our family has a real estate brokerage in the Phoenix area, a division there as well… So we are intricately linked to real estate, and real estate investing, and have been for a very long time.
I initially started my entrepreneurial, professional, adult entrepreneurial career by investing in real state in 2002, and that went really well until 2006, and then it went kind of badly for a little while, and then it’s gone well again, so that’s nice… And Chris has been a real estate investor [unintelligible [00:04:36].29] Chris, do you wanna tell them about yourself a little bit?
Chris Brown: Yeah, I’ve also been in real estate investing for many years; our family — we’re brothers, by the way… But our family is deeply involved in real estate investing, selling, brokering – all the normal sort of things that you get into once you get into real estate.
I have a background in programming and mathematics, so I’ve spent a lot of years building apps, working as a professional software developer, working as a freelancer, building our own software development company and expanding that.
Joe Snyder: So those experiences brought us to form Lannister Holdings, and Lannister Holdings is a blockchain development company based out of Phoenix, Arizona. We are publicly traded, so we’re traded on the U.S. OTC market, under the ticker symbol NBDR.
What we put together was this internal focus on the syndication and packaging and existing legal structures for syndicated real estate investment, as well as we have Lannister Development as a subsidiary, and Lannister Development is focused on building software and technologies, decentralized systems, and that’s really Chris’ world, for our client-facing division.
So we are working on use cases and working with prospects and clients across many verticals, not just real estate and not just finance. But our internal focus is building out the tools and the technologies to run existing syndication, legal frameworks and methods on the blockchain, using smart contracts, using token use cases, all of those kinds of things, with folks just like you, who are doing syndication, who are bringing people together to make group real estate investments.
One of the specific things that we’re working on and talking with different interested parties and partners on is master limited partnerships in the state of Arizona specifically, which is where we’re based… But master limited partnerships and structures like that where you have a kind of illiquid pool, and where we believe that blockchain technology and smart contracts and token use cases can come in and reduce costs, and reduce risk, and add liquidity to these existing structures of investment.
Joe Fairless: I heard everything you said, and I wrote down a lot of it, but I still think “What…?!” [laughter] So dumb it down for me like you’re speaking to a two-year-old right now.
Joe Snyder: I’ll let Chris do some tech piece, but let me just–
Joe Fairless: Well, I don’t need a tech piece, I just need the two-year-old speak… So I’m in real estate, I’m an apartment syndicator… What do you do exactly that can help me out?
Joe Snyder: You’re an apartment syndicator, so you have a traditional method and a traditional legal framework that you are bringing people into and they are combining these in order to acquire whatever blocks of apartments and blocks of real estate that you’re currently acquiring, right?
Joe Fairless: I have groups of accredited investors I work with, and we buy a property. Correct.
Joe Snyder: So our technologies allow that process and that transaction to be digitally contracted, digitally secured, and allow the ownership of those pieces of those assets to be tokenized on a crypto token, so that your investors have an added layer of transparency and security, they also have reduced costs from all of the transaction points being digital, as opposed to a paper or a pen or things like that.
Then on the other side of that transaction there is liquidity for the investment between the parties through the tokenization… So it can go down to heirs, and be split, it can be transferred to other parties… So there’s a whole layer of operations and systems and contractual risk mitigation and cost reduction that can happen by doing that exact same process that you’re doing, with the same legal structures and the same rules and filings that you’re currently doing, but on a decentralized system, with technology, as opposed to the traditional system.
Joe Fairless: Thank you. That’s helpful. I don’t think a two-year-old would get that, but I got that one, so I appreciate you taking it down a level for me… So let me just restate some of what I’ve heard and then we’ll build up from there. What you’re doing now, it would allow an apartment syndication group to do what we do, but do it digitally, and you’re suggesting that it would be more secured, and also it would allow the ownership to the people who own it to then have liquidity through the tokenization of it, and then they could transfer some or all of their ownership to other people through that process. Is that accurate?
Joe Snyder: Yes, that’s correct, and depending on jurisdictions, there are some legal questions about which of those exact structures you’re using, but essentially yes.
Joe Fairless: So why would I want to do that? As someone who puts the deals together, why would I want to do that? Why would I want to change what I’m doing now?
Joe Snyder: Let me have Chris step in there a little bit and talk about why there’s a technological difference between what you’re doing now and how there’s cost mitigation, and then we can talk a little bit more about from the syndicator side of how that looks. Chris?
Chris Brown: Well, I guess the real question is what are the problems that you face as a syndicator? Now, when I’m thinking about this from a technical perspective, I’m thinking about “Who’s trying to purchase a piece of this?” and “Who’s managing the piece of this that they’re purchasing?” and “Who is selling these pieces?”
The digitization in the middle there allows for facilitation of the trading part of that really, and saying “What is a piece of ownership? How do we track a piece of ownership, and how large or small does that have to be? How quickly can we transact that and how can we maintain that we know who the owners are, when they bought it, the chain of title, and everything else that happens inside of it?”
Does that necessarily make your life as the person putting the package together easier? I believe so. I think it adds cost effectiveness of being able to know what the smart contracts are and initiate them at any point, with any set amount of buyers and anything else. Now, you already have those contracts in paper; you have to do them in paper with all these people, and then go and, I imagine, file them, and do all the other steps in the process, which each step costs money.
The digitization here removes a lot of those intermediary pieces, or automates those intermediary pieces, which lends strength to the process itself, so this is no longer in the hands of people, but we’re going between digitized smart contracts that say “If this many people put the money in, we go out and we release the money to the manager to buy X property.”
Joe Snyder: That’s the technical working of it, and how we see it as real estate investors and as people who also have experience with and inside knowledge on how these technologies work and integrate and disrupt systems, we as a company have the core belief that blockchain decentralized ledger token use cases are the core basis for the future of financial transactions and transactability.
So not only is there the risk mitigation, some liquidity factors, all of those pieces, but also there’s the potential to be first in these spaces, and to be some of the first people deploying these things in this way. It does add the potential of accessing larger scales of capital than the existing syndications as well.
Obviously, we’re building these tools for existing businesses and existing syndication groups, just like [unintelligible [00:12:36].12] blockchain tools for existing companies in manufacturing, and logistics, and infrastructure [unintelligible [00:12:42].29] So we believe that working with people who wanna be first in their industry, who want to be earlier adopters of these technologies and these deployments in these real-world existing regulatory use cases, that there’s added benefits right up front as far as security and risk and costs, but also that there’s long-term added benefits of being the people who do it this way from the beginning, and there’s of course the potential of compiling and owning swathes of intellectual property around those processes, because most of this space is very thin.
Joe Fairless: Okay. And I think maybe we can do an example that’s not syndication for real estate, that might simplify some things… Because in my mind, you talk about being a first-mover – hell no, I don’t wanna be a first-mover in this. I’m dealing with millions of my investor dollars, and I do not want to be on the cutting edge of this; I wanna be safely in the middle if I do it… I definitely don’t wanna be at the beginning.
Before we go into a more simplified example, help me understand — you mentioned security of system, but then you also talk about being a first mover, and to me, those are going against each other…
Joe Snyder: Well, first of all, there’s a difference between first-mover and early adopter. Blockchain is being integrated into everything that you’re currently using. IBM is integrating it, JP Morgan Chase is integrating it, Walmart is integrating it… So this is the future of financial transaction technology, we believe that. Our public company is established on that fact.
When we’re saying early adopter – there’s a difference between an early adopter and a first-mover. An early adopter is somebody who’s looking at existing technologies that have over a decade of proof behind them, that are being deployed by the world’s largest corporations and governments every single day for similar use cases, and saying “I want to use those tools for these verticals as well.”
That’s the conversation that we’re having with multiple markets, not just real estate… Across the spectrum of all of the businesses, scaled business, that has all of these contract points, all of these interaction points, all of these verification points. Blockchain allows a supply chain to be inspected transparently, securely and quickly, in a way that has never been possible before.
You providing that early adoption — and not necessarily you; there’s lots and lots of syndication going on out there, there’s lots and lots of this kind of work being done, and that’s an adventure for us, which we love… But the people who are using these tools and deploying these things in the real world, in our belief, in our experience with the market, are having an additional value point to present to their investors, to present to their syndicators, and then additional capital pool from the existing pools of capital that is out in the crypto token and cryptocurrency markets as well, which is not necessarily being [unintelligible [00:15:54].28]
We’re not really a crypto company… Do we know how to build those tools? Absolutely. Do we work with companies that do those things? Absolutely. But we’re not really a crypto company. We believe that the decentralized ledger technology, that the security and the transparency and everything that comes along with that as a core technology is the future of how business operates, how financial contracts get transacted, how mortgages get transacted, how they get packaged, and sold, and securitized – all of those kind of things are the pieces that we are looking at disrupting and impacting. And it’s not a first-mover, but we believe it is still in early adopter phase, and that’s a positive thing for us. We believe that that’s a win, not an expense.
Joe Fairless: I appreciate you elaborating on this. I’ve got friends in this space and I highly respect them. They talk about the importance of blockchain to the real estate industry and how it lends itself to real estate in particular… So I’m just looking to be educated on this, so I appreciate you talking through some of these questions… And I’m just asking them as I’m just thinking of them.
You mentioned the security of the system being greater than the traditional method… How is it more secure if it is in the first-mover stage?
Joe Snyder: Again, just to clarify, it’s not in the first-mover stage…
Joe Fairless: Okay… Early adopter?
Joe Snyder: Early adopter.
Joe Fairless: Okay, early adopter. How is it more secure if it’s in early adopter stage?
Joe Snyder: Sure. Chris, do you wanna talk about the security site?
Chris Brown: In general, we’re talking about cryptographically secure, distributed ledgers, so you have consensus among multiple peers who all are interested parties, and generally for the benefit of the system itself. Doing things like that, if you have, let’s say, four banks that wanna work together, four primary banks in a country, or something… Each of those banks can become part of the same system, become part of the consensus network, saying whether a transaction is valid or not. Then between those four banks, they now have a verifiable, up-to-date, almost real-time ledger of all the transactions that they need to track.
So you could apply that to credit, or here you could apply it to real estate and the division of the package of assets inside the system, where you have a certain number of actors working together to create a consensus about whether or not a transaction took place, whether or not somebody sold, or bought, or was paid their dividend, or anything else.
Once you have that piece, then you have a layer of security against fraud or corruption inside that system or that market itself. And if we look at what these contracts are and what these pieces are here, we’re talking about basically creating slivers of securities and knowing where those securities exist, who owns them, who’s running them, who’s keeping them… It’s very important; it’s the whole point of regulation and registration and everything else.
So we’re moving those to a place where we know what has happened, because the ledger is only secure and only continues when the previous transactions are verifiable… So every transaction is verified by a unique ID from the chain of the previous transactions. I’m sorry if that doesn’t entirely make sense on its own, but essentially, a transaction can only occur if every transaction before it in line is the correct transaction. So if you tamper with the previous transaction, the rest of the transaction IDs are no longer valid, so we can no longer trust that chain of events, which means you can’t go back and tamper with any [unintelligible [00:19:30].11] or else that transaction itself wouldn’t be valid.
Joe Fairless: Sure. Okay, it makes sense. So as a real estate investor who is listening to this and they would like to learn more about this, how can they take the blockchain technology and actually apply it in their everyday scenario to do transactions?
Joe Snyder: Call us! [laughter] Our sales teams are ready to talk to you now. [laughs]
Chris Brown: I think speaking from the side of real estate investors, I think these tools are really just starting to get built and starting to spin up. You’re gonna see a lot of really interesting sort of crowdfunded real estate ventures that allow investors to come into deal sizes and at prices that they’ve never seen before.
It’s very unlikely that I can go with $10,000 to a fund that’s buying 50 million dollars’ worth of apartments, and even get inside the door to talk to their sales team. But as these technologies come forward, you’re gonna see a change in the way that securities are handled, because we’re gonna be seeing a world where you can create your own market for anything you want, at any time, and have it be verifiable and secured by a larger group of people, especially in these large, public blockchains that are currently available, and the ones that we’re gonna see in the future, for handling these sorts of markets and these sorts of financial assets.
So at the moment, [unintelligible [00:20:56].14] for a real estate investor to have a daily impact in their lives, just to know that these tools are coming, and as they do, you have to watch out for what’s real and what’s solid and what’s well done and what has a great team behind it, and what does not. And when you find those things that have great teams behind them and they’re an awesome technology and they’re really allowing a new level and a new type of investing in any sort of asset, not necessarily just real estate… Imagine I could open up a fund to buy a wind turbine and 200k people could buy pieces of it. It becomes a point where you’re automating the internal pieces of what it is to be a market, what it is to pay dividends and what it is do all those things, that you stop caring how many people are involved in the vehicle itself.
So that’s really gonna be a focus point, I think, from my point of view, also as an investor and also as someone who’s currently actively buying property… It’s something very interesting that’s coming on a very short time horizon, so it’s something to watch out for.
Joe Snyder: And additionally, Joe, for folks who are doing syndication or who are structuring master limited partnerships, or who are bringing together groups of investors to do this stuff already – those folks we definitely can help and talk to and review the use cases, and where their jurisdictions are, and things like that, specifically in the state of Arizona.
Arizona is a very blockchain-friendly state from a legislative standpoint; that’s one of the reasons that we’re based there. Arizona has a blockchain sandbox at the state level that does allow us to work with the state, deploy these technologies in real-world use cases for financial instruments, and for up to two years, for up to 10,000 people before the full regulatory processes are required, and things like that.
So depending on where investment groups are or where people are, there are some differences in what can and can’t be done right now as far as the registrations and the rule of law. But we are actively speaking to different investment groups and different syndicators about their particular deals and how to deploy those via blockchain, via smart contracts, with token use cases, as opposed to the traditional paper models.
So those are active, and if there are people out there that are listening to this that are interested in knowing more about that, or talking with anybody, you can reach us at LannisterDevelopment.com and our Contact form is on there… Or @lannisternbdr on Twitter, for sure.
Joe Fairless: Awesome. Well, I was gonna ask you how the Best Ever listeners can get a hold of you, but you’ve just mentioned it. Thank you so much for being on the show and talking about your technology, for educating me from a high level how the process works. I’m sure we could have a conversation for days on end, without breaks, about the technology, and I’m sure Chris would be in his own personal Nirvana if that were to take place… So I appreciate you two coming on and talking to us about this, and I hope you two have a best ever day, and we’ll talk to you soon!
Joe Snyder: Thank you so much. Have a great day!
Chris Brown: Thank you. Have a good one