Interview: MAG and Mantra team up to tokenize real estate assets valued at $500m

UAE real estate developer MAG has partnered with Mantra (OM) to tokenize a $500 million real estate portfolio.

MAG is a leading real estate developer in the UAE with a portfolio valued at over $5 billion. They have collaborated with Mantra to revolutionize real estate investment using blockchain technology.

The partnership will bring a real estate financing vault to Mantra’s custom-built compliance-ready Layer 1 blockchain, beginning with Keturah Reserve, a luxury residential development in Meydan, Dubai. 

The vault offers investors a tempting yield from an alternative asset class supported by blockchain technology’s security.

“The real estate financing vault provides real estate developers with a new source of capital that is outside the more common real estate financing channels on which they typically rely,” Stephen Peepels, General Counsel & Chief Legal Officer at Mantra told crypto.news in an interview.

“Financing can be provided by investors interested in the product who are not accessible by borrowers in the traditional real estate finance market.  So, a whole new pool of capital can be accessed by the developers, which also has the potential to lower their cost of capital over time,” Peepels said.

Annual yields

Investors in the vault are drawing an approximate expected return of 8% APY from stablecoins, a yield that will be further augmented with $OM tokens. 

“The 8% yield is approximate, and it is based on the market rate of interest that a real estate major would expect to pay on traditional debt financing – i.e., the market rate of interest available to a similar developer on a similar type of property,” Peepels added.

The $OM token yield is an additive. The exact amount will be established by Mag and Mantra once they start conversations with potential investors about the product and gather their input. 

“We expect to use a major accepted stablecoin to pay the approximate 8% yield, also TBD when the final product details are determined,” Peepels said.

Property tokenization

MAG and Mantra have ambitious plans to tokenize significant real estate assets. But, they are starting with properties that have known market value, starting with a major residential property backed by a developer’s assessment.

“The first vault will be backed by a major residential real estate asset whose value is determined by the developer based on market factors known to all real estate investors and professionals,” Peepels said.   

If a property’s value drops, MAG and Mantra have mechanisms in place to protect investors by tokenizing only a fraction of the property’s market value. The first vault is expected to tokenize $20 million of an asset with a market value exceeding $70 million, resulting in over 300% collateralization, further secured by MAG’s corporate credit.

The aggregate transaction value of projects to be tokenized will be $500 million, firmly positioning Mantra and MAG as industry leaders in the Middle East’s tokenized real estate market.