Crypto Just Became Real Estate’s Hottest New Thing. Here’s What That Means For Buyers, Sellers, And Developers
Adaptation from an evolutionary perspective is by nature a glacially unhurried process.
It pans out even slower and more painfully when it comes to fundamental changes to the rules by which the real estate industry plays—many of which remain so outdated that they are analogously as irrelevant and inefficient as phones still attached to the wall.
Which is why everyone—brokers, realtors, developers, buyers, sellers, and particularly cryptocurrency investors—should be paying close attention to the current crypto-real estate wave that’s no-so-quietly been sweeping Miami for months especially given Bitcoin’s 50% cliff fall since last November.
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Last June, I broke the story on America’s largest-known cryptocurrency real estate deal to date, which was a Miami Beach penthouse that traded for $22.5 million in crypto equivalency at Arte by Antonio Citterio, located one floor down from where Ivanka Trump and Jared Kushner have been holing up for months.
Since then, Miami’s toes-in-the-water, crypto-housing romance has surged into a full-blown, politically-celebrated tsunami that’s poised to upend the essential financial foundations upon which the whole industry is transacted as ever bigger, more powerful players appear ready to jump in. In the process, the wave’s even more likely to drown out everyone else who’s not interested in keeping up, and more importantly give crypto and Bitcoin investors a savvy way to stabilize their upsides.
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To be clear on this whole Bitcoin-meets-penthouse thing since I’ve been tracking it for a while: a lot of the squawking froth for years has been exactly that—foam without the follow through on the actual processes, partnerships, and exchanges that would make transactionable, regulatable digital real estate deals possible.
Cryptocurrencies, in general, until recently also have continued to suffer from a basic understandability issue, which not surprisingly has hampered adoption with buyers who are still leery of betting the largest, long-term wealth-generating decision of their lives on a bunch of servers, zeroes, and ones. Housing and real estate investing already are fraught with financial risk (Great Recession anyone?). So why pile onto it with even more uncertainties by injecting a digital currency proxy that gets everyone even more confused in the first place?
For most developers and investors—many of whom have made billions over their careers selling houses and condos the old-fashioned way—real estate’s potential crypto new normal is still terra incognita as well. Rightly or wrongly, substituting the basic currency upon which empires already have been built for generations triggers fear. Because no matter how outdated the current rules are, everyone at least knows how the game is played and the inefficiency premium that has to be baked in.
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Since late last year, however, Miami’s crypto-real estate boom has been challenging all of these conventional wisdoms as the price of crypto currencies like Bitcoin specifically have surged.
In the process, it’s also laying the potential rails for a new financial framework for how buyers buy and sellers sell that could spill over into other frothy real estate markets in tech-centric cities like New York, San Francisco, Austin, and LA just as quickly as it’s taken root in Miami.
If that happens, the implications for real estate writ large are huge. For the early adopting developers and builders who’ve already realized that cryptocurrency deals are legit, legal, enforceable, efficient, and here to stay, it also raises the more strategic question about just how far the digital-real estate revolution can go, and what it will take to stay ahead of the curve once everyone else jumps in.
Cipriani Residences Miami is the next in a wave of South Florida developments accepting Bitcoin and ... [+] other cryptocurrencies for deposits and paymentCourtesy of Cipriani Residences Miami
“Innovation has always been at our forefront,” says Camilo Miguel, Jr., Founder and CEO of the real estate firm Mast Capital and developer of the recently launched Cipriani Residences Miami, the first ever ground-up Cipriani-branded condominium in the U.S. “And it’s clear that cryptocurrency is the next generation of wealth and will become a significant factor in real estate transactions in the future. Next generation buyers are individuals who want the ability to diversify their investment portfolio into real estate quickly and easily, and the combination of blockchain and crypto allows them to do that.”
So not surprisingly timed, last week’s announcement that Cipriani Miami will begin accepting cryptocurrency deposits through the crypto exchange FTX coinciding with the recent inaugural Formula 1 Miami Grand Prix, is one more sign that Magic City’s blockchain wave is here to stay—particularly when it comes to international buyers eager to diversify their cryptocurrency holdings into South Florida’s searingly hot real estate market.
“With the Formula 1 event sponsored by Crypto.com and FTX's sponsorship with Mercedes F1, this timing couldn’t be better for us,” Miguel Jr. continues. “We’ve been consciously trying to identify a platform that works for our business of selling luxury condominiums while providing a seamless crypto buying experience, and the solution that we've reached with FTX achieves both.”
The future of what crypto buysCourtesy of Cipriani Residences Miami
For everyone wondering what that “solution” actually looks like from a transactional standpoint, here’s how it works:
FTX, thanks to its leading crypto trading platform (think NASDAQ for digital currencies), is able to convert Bitcoin or Ethereum or any other cryptocurrency into U.S. dollars in a fraction of a second through its online exchange regardless of what that transaction is based on from a value standpoint e.g., a Picasso-backed NFT (non-fungible token), the lyrics to a Bob Dylan song, or the penthouse one floor down from David Beckham.
In purely real estate terms, that means a buyer from anywhere in the world can put a pre-construction deposit down on a condominium in Miami in any cryptocurrency that moves from their digital wallet to a traditional American escrow account in equivalent U.S. dollars with the swipe of an app virtually instantaneously—all while meeting AML (“anti-money laundering”) and KYC (“know your customer”) SEC regulations that make the transaction street legal and compliant in the first place.
For the real estate developers on the selling side of things, FTX’s warp speed conversioning also mitigates crypto’s infamous market volatility swings like what’s happened recently with Bitcoin, ensuring that $22.5 million for a penthouse actually means $22.5 million when it comes to money in the bank at the time of transaction.
The future of crypto-meets-real-estate is limitlessCourtesy of Waldorf Astoria Residences Miami/PMG
“FTX's first in class conversion speed is what makes them the leader in the crypto marketplace,” says Miguel Jr. “In addition to AML and KYC, we’re obviously most concerned about crypto volatility as developers. And FTX has alleviated those concerns by allowing us to accept deposit payments made from all major cryptocurrencies to U.S. dollars in a matter of seconds. They’re respected in the Miami brokerage community, the namesake for the Miami Heat’s FTX Arena, and have appointed a specific real estate-focused team to work with buyers throughout their entire transaction to ensure that the process is simple and seamless so we feel confident about what we’re doing and buyers can as well.”
Property Markets Group (PMG) has sold more real estate in cryptocurrencies that any developer in the ... [+] world over the past year, including at E11even Residences MiamiCourtesy of E11even Residences/PMG
While new-to-the-game real estate investors like Mast Capital in Miami are just jumping on the crypto train, Property Markets Group (PMG), a global real estate development firm with a 30-year portfolio of hospitality, luxury and mixed-use residential real estate, deserves the credit for sending it out of the station in the first place.
Last year, PMG became the first developer to forge a partnership with FTX and start accepting crypto for deposits at their new Waldorf Astoria Residences. A few months later, they started accepting crypto at their new E11even Residences development just up the street. Eight months later, that “proof on concept” exercise now equates to crypto deposits for more than 75 condos in both buildings totaling more than eight figures in pre-sales financing.
For what it’s worth, these aren’t small ball numbers.
Since last year, PMG has closed more real estate deals in cryptocurrency than any other developer globally. And with more than $5 billion in real estate development planned over the next five years, every other developer should be paying attention to PMG’s announcement last week that it will now accept cryptocurrency as a form of payment for all pre-sales and for-sale condos in all of their U.S. and global developments in partnership with FTX—becoming the first international developer to go all in on crypto and sending an unmistakable signal to everyone else in the industry that digital currencies are real estate’s future not a fad.
Property Markets Group (PMG) has taken crypto deposits for more than 75 units at its three new ... [+] buildings totaling eight figures. How's that for proof of concept?Courtesy of E11even Residences Miami/PMG
“For three decades, PMG has been committed to staying ahead of the curve on innovation,” says Ryan Shear, PMG’s Managing Director. “We are proud to be the first residential real estate developer to accept crypto deposits in pre-construction condominiums globally. And this milestone is in line with our goal to consistently pave the way for innovation and being ahead of the curve in the marketplace. Accepting crypto deposits made sense for us because it is the embodiment of cutting-edge technology.”
Turning volatile cryptocurrency holdings into stable real estate assets is why many crypto ... [+] millionaires and buyers are flocking to MiamiCourtesy of Waldorf Astoria Residences Miami/PMG
For international crypto investors in particular, many of whom hold volatile, multi-millionaire dollar portfolios, what Shear saw a year ago was the ability to offer a new generation of young, savvy fintech pioneers the ability to transition some of those investments into more stable, traditional asset classes like Miami’s smoking hot luxury condominium market which hasn’t twitched an inch of volatility and isn’t showing any signs of slowing down.
“We saw an opportunity to allow people to diversify their cryptocurrency assets and easily transfer funds into stable, physical real estate,” Shear says. “And accepting crypto offers buyers a more accessible way to do that and purchase units. Blockchain and digital currencies expedite the purchasing process and reduce barriers international buyers face, which is a key tool for us when developing in a growing international city such as Miami. International buyers in particular can quickly purchase a condo while avoiding international fees and bank wires, and crypto allows for the opportunity to quickly move assets from international banks and exchanges to secure American investments.”
Volatile no moreCourtesy of Waldorf Astoria Residences Miami/PMG
As for the remaining risks, naysayers, and resisters, there’s not a lot left to harp about, adds Shear.
“The success and record sales pace that we have witnessed at E11EVEN Residences Miami proved to us that crypto deposits are the future of real estate and a tool that we should use across all of our projects. Being an early adaptor in any market involves risk. But partnering with a company like FTX has given us the confidence to let innovation happen while being confident that the increasing demand for crypto in Miami is here to stay. Similar to PMG, FTX has always been forward thinking and committed to growing Miami as America’s crypto epicenter.”
At the rate PMG and FTX currently are going, that pace is just going to accelerate and the biggest challenge for everyone else will be keeping up.