Blockchain, ICOs, Big Data, SBS and AI; The Coming Future of Real Estate
Q & A with Real Estate Technology Veteran Michael Gerrity
Michael Gerrity has been at the forefront of real estate for more than 30 years. First, the Orlando native had a stellar real estate brokerage career, selling and leasing nearly $300 million worth of commercial office transactions during his 17-plus years in the business. In the last 15 years, Gerrity, now splitting time between his Miami, Fla, Irvine, Calif., and Lower Manhattan offices, has made a name for himself as an entrepreneur in the real estate technology space as the founder and developer of multiple high-profile PropTech companies via his Miami-based investment firm Gerrity Capital
Among his portfolio of real estate tech companies he has created: The World Property Journal
, a leading international real estate news outlet; GlobalListings.com
, a growing international property listing platform that recently surpassed 2 million worldwide monthly property listings within just 7 months of launching; and the soon coming World Property Exchange
The latter company is Gerrity's most ambitious effort to date.
His goal: "To significantly leveraging enabling new technologies of Blockchain, digital securitization, Initial Coin Offerings (ICOs), crypto-currencies, artificial intelligence and matching engines, to democratizing high quality real estate investing on a global scale". In the coming years Gerrity's World Property Exchange Group, Inc., will be the developer, owner and operator of a series of "globally emerging, patent-pending and fully government-regulated Digital Real Estate Stock Exchanges."
Ultimately, Gerrity's World Property Exchange is a platform that will feature "micro IPOs, or technically ICOs (Initial Coin Offerings), for real estate assets all around the world that can be traded like shares of stock." The net outcome, as Gerrity sees it: "For the first time in the history of real estate, we're going to create a highly liquid and digitally secure marketplace where investors of all sizes can move in and out of positions of high-quality and targeted real estate ownership opportunities as easy as buying a book on Amazon. Point; Click; Own."
From our one-hour Q&A interview this past week, the following are some of Gerrity insights on how technology is poised to greatly redefine and disrupt the $12 trillion a year global real estate industry in the coming decade.(Q) Blockchain technology is making headlines in the currency world with the high-profile Bitcoin being the main player. You see this same type of blockchain technology greatly disrupting the real estate industry. How so?(A)
"The global real estate market is a very large, yet highly fragmented and dislocated industry. One problem that a company like Zillow and others like them has is getting the proper data to get proper valuations because you're pulling data from county records or other sources that sometimes have bad information, wrong numbers, etc...so the algorithms make guesses and sometimes the output from bad data is off. As the saying goes: garbage in, garbage out. But blockchain technology as it applies to real estate, will eliminate most errors and fraud in a transaction, because blockchain is a distributed ledger database that verifies all transactions by all participants in the blockchain ecosystem before two parties approve a transaction.
That high-quality transaction verification and ownership process in itself can really disrupt the title industry for one. As an example, under a blockchain transaction platform, there's no need for title and deeds anymore. The blockchain itself is the legitimate 'chain of title and ownership' itself.
"And it can one day become a legitimate global property registry too. The problem with real estate, especially on the international front, is most countries do not record at the local and county records a property transaction between buyer and seller, and related metadata about the property itself - like age, square footage, price paid, things like that - so there's no accounting or record of the transaction or the property itself in many emerging economies.
So blockchain can be an application that will not only help in the United States real estate market, but the international front as well because it creates an immutable ledger of all property transactions and each transaction record is authenticated, and held by all people on the blockchain platform.
Gerrity reiterates, "It's fraud proof and valid data on a blockchain platform. You can't do a transaction without ALL the people in the entire blockchain ecosystem concurring with the transaction. And if somebody tries to add another 'block' to the chain (another transaction that is) without permission of the real seller and all holders of that record, the transaction is marked immediately as fraud and terminated instantly".(Q) You're playing in the big data game with your new venture, GlobalListings.com, which just exceeded 2 million worldwide listings this week? How do you see the data revolution influencing real estate businesses?(A)
"Data has always been important but now you have these two things called Big Data and the Internet of Things, or IOT as its called in the tech world. Which enables a company to capture on all Internet connected devices and platforms consumer behavioral patterns across multiple spectrums of industries on websites, cell phone APPs and compile that user data. Then, you're able to mine those mountains of data and find important trends and anomalies inside of those behavioral patterns, and through the help of super high powered computer algorithms, analyze tens of billions data points in seconds and pull out nuggets of information that are very valuable.
"As we become much more connected through the Internet of Things, there's been more data generated in the last 2 years of mankind than the last 20,000 years of mankind combined. ...and here's where all the data leads. When you amass enough data and trends. The secret sauce here is predictive analytics. The data will start to show a business what a certain type of consumer may be looking for - before the consumer themselves even knows they want it -- and enable the business to start making suggestions and lead them to what they will likely want, with a very high rate of customer preference customization and ultimately transaction completion success.
"And that's what's interesting enough about the real estate space. For instance, our Globallistings.com platform, which is now becoming 1 of the top international property listing platforms in the world by amassing millions of listings from hundreds of countries around the world. And the more people using our listings search platform, the greater amount of consumer behavioral pattern data for us to study - that will soon enable our platform to start making suggestions on certain properties they might want to look at before they even think about it."
"It's similar to the wonderful and easy Amazon book-buying experience, where, after you buy 2 to 3 books, Amazon.com website will start to suggest books you might like with a high probability of success. That's because they have data on a million others that liked the same books. And have similar personalities. It's called data soul-mating."(Q) You're particularly excited about a number of technologies like blockchain that will be a key ingredient of your planned World Property Exchange, a revolutionary technology-based concept that will bring "real estate wealth to the masses." How do you see this playing out in the future?(A)
"As I said before, the blockchain creates an immutable transaction ledger that greatly reduces fraud and transaction friction. It also creates a standardized way of doing business. And it also creates a historical record of every piece of metadata related to the transaction for big data purposes and it's greatly starting to disrupt the financial industry. Major Wall Street firms are investing tens of billions in dollars per year into new blockchain-enabled platforms and companies called FinTech (financial tech) companies in the financial world. It's really going to eliminate the middleman when it comes to banking, finance, wealth management and capital raising.
"With that being said, I think another key marketplace to be affected medium-term, say in the next 3-5 years, is going to be real estate investing. And we plan to capitalize on that space with our emerging World Property Exchange Fintech venture (aka WPE) we're launching in 2018 that is significantly leveraging blockchain technologies, digital securitization and crypto currencies to create the world's first all-digital real estate stock exchange. We've also just filed a technology patent on our digital investment platform with our top-tier Silicon Valley law firm Wilson Sonsini.
"Once launched, we're going to have the ability to take hand-picked and highly curated quality real estate assets and digitally securitize and blockchain ownership of those individual property assets into smaller bite-sized shares in a new financial product we created and have now trademarked and call a Synthetic-Backed Security (or SBS), which will allow for ownership of individual property assets it to be traded like a regular share of stock.
"On the investor client side of our platform, when you come in and become a client of WPE and wire in say $10,000 or $50,000 of your funds and open up an account with us -- like opening an online E-Trade or Betterment.com account -- we're going to issue you a matching proprietary WPE crypto currency matching dollar for dollar for your dollars wired in to open your account with WPE. And those digital coins WPE issues you (WPEcoins they'll be called) are effectively 'automated smart contracts' that can be instructed by you to buy certain types of property assets, or shares in these kinds of assets locally or globally. Then, the WPE's platform will be able to go out to our platform's Matching Engine and acquire individual property SBSs based on your investment criteria.
"In effect, for as little as $1,000, we're going to democratize real estate investing of high-quality properties for the small, medium sized investor. So as a small investor with one thousand bucks on the WPE platform, you can have ownership of high-quality real estate that is producing 7%, 10% or even higher annual rates of return between the assets' cash flow of the rental income and the appreciable value of the asset itself. That far outstrips leaving your money in a CD earning maybe a half a percent a year."
"Think about it. Home ownership is at a 60-year low. ...You can't create wealth in this world unless you OWN stuff. Renting is not going to get you wealth; owning is. So the value proposition to a lot of people like these millennials who many can't afford to buy a whole house. Now you can buy a piece of a house and start building wealth anyway."
"Basically the World Property Exchange's primary goal is to take a large, highly fragmented and none-standardized marketplace called the global real estate capital markets industry and create a unified and friction-free real estate environment that will now enable small to medium-sized investors to participate in real estate ownership worldwide in a secured way - very much having the same impact on the global real estate industry like Malcolm McLean had on global shipping 60 years ago through the invention of his standardized shipping container known worldwide as the TEU or Twenty-foot Equivalent Unit.
Malcom McLean DID disrupt a very large, highly fragmented, fraudulent and none-standardized global shipping industry with the launch of his first standardized container ship called the SS Ideal X out of the port of Newark, New Jersey on April 26, 1956, and his standardization or containerization of cargo ships (and ports' loading and unloading infrastructure) around the world was the genesis and the underlying platform to drive what has now become globalization. Once global shipping became standardized with his TEU model, global shipping exploded with growth in the following decades while significantly driving down shipping labor costs and fraud. We feel that with enabling new technologies like blockchain and others -- WPE now has the same opportunity for a similar-sized market disruption as Malcom McLean enjoyed -- by introducing a better mousetrap ourselves. A seamless, secure, liquid, lower cost and standardized global real estate investment platform".(Q) Real Estate has always been such a personal type of business, especially for Realtors and Agents. What will the industry look like in 10 years as other technologies like artificial intelligence begin to find its way in the business?(A)
"I think in the next 10 years the technology will be so advanced that a lot of the Realtor functions of today will be performed in a downloadable Smart-App. The App will initialize by asking a few questions about yourself, your age, date of birth, social security number and will then scour all of the known networks and databases, and learn everything about you and generate a profile about you instantaneously.
"It'll know what you're capable of buying and what you're able to finance based on your track record, financial history and strength of your job. Then through voice recognition software you'll be able to talk to it like a person through your cell phone app and say, 'I want to see Central Florida homes in this zip code. I want 3 bedroom 2 bathroom homes in the $300,000-$400,000 price range. It will pull up instantaneously all listings. You'll be able to look at these listings through your cell App.
You say I want to bookmark these 5 properties; set up a tour for me. The App will then contact the App with these listings and coordinate a tour. You will then go on a tour. Bring your cell phone with you and through advanced GPS technology, it will know exactly where you are and through say 'Apple Talk', start talking to you about the house you're looking at. It'll give you all the known information about the house and seller and anything negative and positive about it. And as you go through these tour of homes with your GPS enabled smart App, artificial intelligence technology is talking to you in a natural conversation like it's a real person.
At the end of the day you say I like this last house we saw and they're asking $375,000. The App says based on him getting a new job and has to be there in 2 weeks the probability of you offering $325k is probably a 59% chance; but if you offer $362k there's a 75% chance at that price being accepted. It will advise you statistically on pricing and then you make your offer to the other App.
After being verifying with a retinal scan it's you, from there you say close and boom you close; you have digital blockchained title; digital transfer of money and you own the house in 2 seconds flat. It will be as simple as point, click and own one day, too. Yet I also think certain segments of the population that will still want to use a real estate broker in their transaction -- and will be willing to pay a menu-style priced fee directly for such added-value hand holding services -- like first time buyers, the elderly and very high net worth market, who typically love using consultants when buying and selling their high-end homes.
But technology is going to disrupt every industry; and if you don't prepare for it you're going to be toast. According to Bloomberg News, up to 50% of all professional service jobs in the next 15 years are at risk of being displaced by automation, artificial intelligence and technology/apps. That means lawyers, bankers, doctors, pharmacists, and Realtors all are at grave risk of great disruption in the coming decade.
And let me also state that I mean no ill will to any of these hard working professionals, many are my dear friends. But don't shoot the messenger either! It's very important for all professionals, Governments and societies at large to understand and be prepared to adapt to a rapidly changing world in which we now live in today and for tomorrow.
Because ultimately, technology is like gravity -- in the long run -- it's non-negotiable!"