UAE real estate developer MAG has partnered with Mantra (OM) to tokenize its real estate portfolio worth $500 million.
MAG is a leading real estate developer in the UAE with a portfolio valued at over $5 billion. The company has partnered with Mantra to revolutionize real estate investing using blockchain technology.
The partnership will see the deployment of real estate lending safes on Mantra’s custom-built, compliance-ready Layer 1 blockchain, starting with Keturah Reserve, a luxury residential development in Meydan, Dubai.
The vault offers investors attractive yields from an alternative asset class backed by the security of blockchain technology.
“The Real Estate Lending Vault provides real estate developers with an additional source of funding outside of the more conventional real estate lending channels that they typically rely on,” Mantra general counsel and chief legal officer Steven Pepels told crypto.news in an interview.
“Investors who are interested in this product can access financing that they wouldn't be able to access from borrowers in the traditional real estate finance market, so developers can access an entirely new pool of capital, potentially lowering their cost of capital in the long term,” Piepels said.
Annual Revenue
Investors in the vault earn an expected return of roughly 8% annually from the stablecoin, and this return will be further increased by the $OM token.
“The 8% yield is an estimate and is based on the market interest rates that large real estate companies are expected to pay on traditional debt financing, i.e. the market interest rates available to similar property developers on similar types of properties,” Peepels added.
The $OM token yield is additive, the exact amount will be determined after Mag and Mantra discuss the product with potential investors and gather their feedback.
“We plan to use major accepted stablecoins to pay a yield of approximately 8% once final product details are finalized,” Piepels said.
Tokenizing properties
MAG and Mantra have ambitious plans to tokenize significant real estate assets. But they are starting with properties with known market values: large residential properties backed by developer valuations.
“The initial vault will be backed by major residential real estate assets, but its value will be determined by the developer based on market factors known to all real estate investors and professionals,” Peepels said.
In the event that the properties decline in value, MAG and Mantra have mechanisms in place to protect investors by tokenizing only a portion of the properties’ market value. The initial vault is expected to tokenize $20 million of assets with a market value of over $70 million, resulting in over 300% collateralization and further protected by MAG’s corporate credit.
The total transaction value of the tokenized projects will be $500 million, solidifying Mantra and MAG's position as industry leaders in the Middle East tokenized real estate market.