Only in San Francisco. At least for now.
20Mission, a 41-room co-living space owned by early Bitcoin millionaire Jered Kenna, is offering a cross between marketing zing and a new type of real estate asset.
Using NFTs—non-fungible tokens that use basic technology at the foundation of cryptocurrencies and provide ownership of digital assets—Kenna is letting people bid on 75-year rights to lease a room for $1 a month, everything included.
NFTs have hit a recent wave of hype as ways to sell all sorts of things: bad art to a $69 million art auction at Christie’s, a virtual guitar and digital clothing from musician Shawn Mendes, and a video clip (hopefully with all rights attached) of a LeBron James dunk.
“Originally, I wasn’t going to implement NFTs,” Kenna tells GlobeSt.com. “Then I realized it actually does make sense from an ease-of-use perspective. Of course, the timing is great. Everyone is talking about NFTs at the moment, but it is also indisputable the underlying asset has value. I really don’t want to see these go for something ridiculous like 100 years-worth of market rent. I’m trying to introduce a new way of viewing property ownership and bring liquidity to a traditionally illiquid market.”
The property is financially hot, normally with a 98% occupancy rate and $2,000 a month rent for each room, meaning nearly $1 million annual revenue. That doesn’t count the ground floor and basement with roughly a combined 24,000 square feet of commercial space.
There’s no telling yet how much the market will bear, but Kenna says that studio apartments in the neighborhood go for about $1 million, and that won’t include the potential hundreds of dollars a month in condo fees. “I think these will go for at least $300,000 or $400,000,” Kenna says, but in San Francisco’s crazy market, he may be underestimating.
An owner of one of the NFTs could live there, sublet, redecorate as they will, or see if the NFT appreciates in value and then sell it to someone else, with a 1% royalty fee back to Kenna. The long timespan was to avoid something that just seemed to be another lease.
“For me, this may be a brand-new asset class that makes sense,” Kenna says. “I think it could open ownership to underrepresented buyers. But things change slowly.”
“I don’t think it’s that much different from a lot of what we’ve been hearing over the last five years of putting leases on blockchain,” Richard Johnson, CEO Texture Capital, tells GlobeSt.com. And CRE tokenization has been a topic for a few years already.
There are still bugs to work out. Does insurance cover if the building is demolished before the 75-year period is up? Will others try this and offer owner financing at a premium?
If things work out, Kenna plans to try this with another property he has in Austin. And if successful there, expanding the concept.