In 2015, seasoned real estate investor Adam Koehler and two business partners sold startup Dotloop to Zillow for an impressive $109 million. Since then, Koehler has continued to run Reversed Out Creative, a digital agency providing creative and tech resources for businesses that lack the skills in-house.
In 2016, he founded CovWorx, a coworking space in Covington to support freelance creatives while also facilitating access to the local startup ecosystem, and he runs a podcast called Side Hustle City that promotes entrepreneurial ventures.
As if all that weren’t enough, Koehler has channeled his early interest in blockchain technology and decentralized finance into a second startup called C-Prop, which focuses on providing liquidity to real estate investors.
Hot off the success of Dotloop, you’ve launched C-Prop. What’s the origin story? My two co-founders and I were heavy into crypto and blockchain tech back in 2016. They both had a background in commercial real estate and a history with JLL. Sandy (Selman) had managed a $100M VC fund out of Hong Kong for years. We started thinking that blockchain tech and tokenization were the future. We sat down at CovWorx and came up with C-Prop.
What do your partners bring to the venture? Sandy is the money guy. His VC background has been extremely helpful when dealing with regulation, investors and keeping us on task. He’s also the author of all of the white papers you see on the website. Luke (Sesito) is a CPA and a great salesperson. He has connections in the Middle East and Latin America where he has worked in real estate and clean energy for years. His connections have provided us access to capital and a global understanding of real estate issues. He’s also helped identify pain points where blockchain technology would be most effective.
What is blockchain technology and how is it integral to C-Prop? Blockchain technology is about transparency and trust. A network of computers validates transactions on a shared ledger. A “block” is just a series of transactions. Once the block is full it gets committed to the “chain.” Each block in the chain is connected with a set of numbers and it’s thought of as impossible to go back and change a transaction once it’s been committed to the chain. It’s used with technologies like IoT (Internet of Things) in industries like logistics where different parties might not trust each other’s records. If a box of fruit sits on a dock too long and spoils, everyone on that network knows whose fault that is.
Blockchain is also the technology behind cryptocurrencies like Bitcoin, which has no central authority. The computer network is the unbiased authority, and they all play a role in validating transactions on the network through consensus. All of the computers need to agree that a transaction can be committed to the blockchain before it goes through.
C-Prop not only addresses the low liquidity of commercial and residential real estate, but it could also have a radical effect on affordable housing. How would that work? One issue that has prevented upward mobility in some demographics has been access to homeownership and the concentration of poverty to certain neighborhoods.
Tokenization of residential property could help lower-income people gain access to homes in better neighborhoods. Buyers and HUD could pay what they can, and investors could pick up the rest of the mortgage, giving them access to high-quality homes in desirable neighborhoods with good schools. Of course, this would come with stipulations.
Ideally, both parties would benefit from an increase in equity and also have the ability to sell that equity on an exchange without putting the property on the market. Equity in the home for the low-income resident could be tied to milestones like their children’s grades, graduation and college. This would be the case if the family was currently in a HUD program as a renter.
It would be cheaper to just buy homes instead of continuing to keep them as renters, unable to build wealth and break that cycle of poverty. The equity (low-income residents) could pull could only be used for things that will help them break that cycle — like paying for college, a car for work, etc. For example, Section 8 pays about $1,200 per month for a three-bedroom house in Westwood. That same house could sell, and the mortgage would be $600 per month, including taxes. That’s half of what Section 8 is paying a landlord.
Keep in mind that only one in four people who qualify for affordable housing in Cincinnati can get it. The savings in just buying homes would now provide half of our citizens in need access to housing without raising the HUD budget. Now, what if investors came in and flipped the bill for half of the mortgage?
Then all of the low-income residents in the city would have adequate housing and you could actually spread them out instead of concentrating poverty to certain areas that accept vouchers. Both sides of the aisle would be happy. You didn’t raise taxes, investors are making money, and people have somewhere to live and the ability to build wealth.
How does tokenization work? Tokenization is the process of taking an asset with value and breaking it up into smaller pieces of ownership. In the case of real estate, you create a special purpose vehicle (SPV) that holds the title, and the token holders own the SPV. It’s up to the owner how many pieces they want that to be, but it could be 1 for $1. If I own a commercial building worth $5 million, I can break up the value into 5 million tokens. I can issue those tokens to other owners through a decentralized wallet. This can aid the real estate world by helping the owner get liquid. Many people have their wealth tied up in real estate. If that property was tokenized and the shares lived on a real estate exchange, the owner could offer up some for sale. The owner gets cash, and the buyers earn small ownership stakes in the real estate. In the future, property will trade just like stocks if we have anything to do with it.
Digital securities are simply an update to traditional securities and can represent fractional ownership in any type of underlying asset – debt, equity, or hybrids. Referred to as security tokens, these securities are regulated just as any other financial security but are issued and traded using blockchain technology to track their ownership at any moment in time.
Where is C-Prop in its startup journey? We are currently raising a $1 million round to finalize our exchange with our financial partners in Liechtenstein and provide the business with working capital. We will be building a fully regulated real estate exchange that will enable members to purchase and trade commercial real estate-backed digital asset securities from anywhere in the world. We have completed a finance and technology joint venture called seriesOneX between seriesOne and C-Prop, created to capitalize on the expansion of blockchain technology within the securities market. We bring together like-minded and forward-thinking experts in structured finance and technology to usher in a new era of exchange-traded digital asset securities. As part of the partnership, C-Prop develops and deploys blockchain-enabled applications in the real estate and fintech sectors to capture new revenue prospects, address pain points and reduce risk. SeriesOne, a leading fintech company and a registered U.S. broker/dealer is offering tradeable digital financial products that help migrate traditional, centralized financial systems to peer-to-peer finance.
SeriesOneX was formed to develop and operate regulated digital securities exchanges in key financial centers in Europe, the Middle East, Asia, and North America. Overall, we want to include the best features of blockchain technology to deliver unparalleled efficiency, transparency and security to commercial real estate finance. It’s a mere format update that overhauls the inefficient segment of the regulated securities market to allow the operation of a fully licensed marketplace where institutional and retail investors can participate side by side.
Your ideas on affordable housing have immense potential for Cincinnati. Will you consider another run for mayor? I’m keeping my options open. I would have loved the opportunity to make some real changes in the city, especially in the housing sector. Unfortunately, I came four signatures short of getting on the ballot. I just hope the folks we have running can think of creative ways to keep both business and affordable housing advocates happy. There is a need for an entrepreneurial mind in that mayor’s seat. But my role might be more in the private sector, building successful companies, providing jobs, and attracting investor capital to the region.
