Technology

Eve Picker: Hey everyone, this is Eve Picker, and if you listen to this podcast series, you’re going to learn how to make some change.

Eve Picker: Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Sandy Selman, co-founder of CPROP. CPROP is a young blockchain real estate technology company. They are focused on creating blockchain-enabled data applications in the real estate and fintech sectors. I’m interested in how blockchain might impact real estate and, of course, my crowdfunding platform.

Eve Picker: Sandy is a roll-up-the-sleeves, highly strategic, and hands-on kind of guy with big-picture vision and an on-the-ground approach. He’s had plenty of operational experience as an investor, advisor, and founder, as well as CEO, CFO, and board oversight. He’s not a starstruck young thing wading into the next best technology because it’s cool. His experience has led him to believe that blockchain has enormous value for real estate in the future, so this is worth listening to.

Eve Picker: Be sure to go to EvePicker.com to find out more about Sandy on the Show Notes page for this episode and be sure to sign up for my newsletter, so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve Picker: Hi, Sandy. How are you this morning?

Sandy Selman: Great. How are you?

Eve Picker: I’m very good. You have had an extensive career in a variety of industries, and you’ve founded three companies, so I think you could be called a serial entrepreneur. Am I counting right?

Sandy Selman: There was probably some additional ones in there that I just care not tell anyone about, but let’s go with three.

Eve Picker: So, really a serial entrepreneur, okay. I want to talk to you today about your latest venture, which is CPROP. It’s a company focused on blockchain and its application, in particular, to the real estate industry, which I find really interesting because I think that we’re all going to hear a lot more about that in the future. First, I want to ask you, what’s your background, and what led you to CPROP?

Sandy Selman: It’s been a long kind of twisty, windy road, but I started out my professional life as an engineer and quickly realized, within the first two weeks of getting on the job, that wasn’t what I wanted to do. I went into investment banking, specializing in the financing of infrastructure like power plants, and wastewater treatment plants, and the big infrastructure. I just became fascinated with the way the world worked from an infrastructure standpoint.

Sandy Selman: Around the mid-’90s, I was working for a big global company financing projects in the Pacific region, specifically China, and I became very disenchanted with that work, for its lack of social and environmental purpose. I jumped ship, and I founded an early-stage clean technology venture fund, which I thought would combine the best of my financial and technical skills, but also my desire to work on things that had more than just a financial return to them. That was a very, very interesting journey.

Sandy Selman: After my fund wound down, which, coincidentally, was at the start of the Great Recession – bad timing – that’s what sort of drove me to be an entrepreneur. The startup that actually led to the founding of CPROP was an IOT – Internet of Things – and data science company that I founded with a partner, focusing on … We initially started the business to bring smart building solutions to the commercial and government sector in the Middle East but eventually, we pivoted it back to the U.S., and we ended up getting this massive contract with a big, global property management firm.

Sandy Selman: We worked on a project there to develop a product that had to do with more effective capture and management of data to inform big capital decisions, particularly the capital-planning process in very, very large commercial properties. It was amazing to us that this big, global company, given their resources and sophistication, just how inefficiently the data was managed throughout the value chain inside the workflows of this enterprise and how that led to, potentially, misallocations of capital in the hundreds of millions of dollars. That was kind of a ringside seat.

Sandy Selman: It’s about the time we were wrapping up that project, we became interested in blockchain. My partners who were younger than me started trading crypto, and that led us to getting deeply involved in blockchain and realizing that blockchain could actually address many of the industry ills that we saw in that project, and that’s what led to the founding of it. It’s a long answer to your question but that’s how we got going.

Eve Picker: Wow. Are you suggesting that golden oldies aren’t interested in crypto?

Sandy Selman: No, I don’t want to suggest that, but let’s just say it wasn’t for me.

Eve Picker: Just wondering … No, it’s interesting. Blockchain, this is actually the thing that most people pretend that they understand, and I could be one of them. So, I think it would be really worth hearing a plain-English explanation of what blockchain is and what it does.

Sandy Selman: It’s a common question I answer probably 10 times a week. So, blockchain is nothing more than a data architecture. It’s not a lot of the things that you hear about it. It is not cryptocurrency. Cryptocurrency is just one application for blockchain. Blockchain, itself, is a platform technology, which is known as a distributed-ledger technology. All that means, in plain English, is that data is stored on multiple computers that are part of the network. It’s a network that is, once data is placed onto it, you cannot erase data that was put on; you can only append to it. It’s very, very difficult to get data on the network. There is a protocol as to how data gets written onto the network.

Sandy Selman: What it does is … The practical use case for it is, again, in plain English, it provides an external data architecture, external to, say, a company’s enterprise servers, for example, that allows you to validate content and timestamps of data. It allows you to determine with 100-percent accuracy whether specific data existed on or before a certain point in time. That’s its central utility. Now, the applications of that range from – in real estate – range from things like automating compliance to the creation of digital currencies that can be used in the financing of real estate, which I’m sure we’ll talk about in a few minutes. Does that help?

Eve Picker: Yeah, yeah … It’s still a little bit hard to understand because probably most people got … Well, not most, but probably some people got stuck on distributed ledger, if they’ve never really heard that term before. What’s a real-world example of someone using blockchain, right now, that is digestible, do you think?

Sandy Selman: I’d say the blockchain applications that are in commercial practice today are a little bit esoteric, and they have to do with the creation of digital currencies in the financial system. So, companies like J.P. Morgan have created an internal coin; it’s a digital currency that they call the JPM coin, which they use to more effectively execute wholesale market transactions between different parts of the world of their operation. As opposed to sending money through the Swiss system, they can do it much more efficiently and quickly with this digital currency.

Sandy Selman: But in the data world, there are applications that are quickly catching up. The accounting profession, the insurance profession, any kind of audit and compliance – there are applications galore in the works … Actually, I was just talking to a friend of mine this morning about this, about how broker-dealers and compliance departments are … Those functions are going to be fundamentally changed by this technology because, essentially, blockchains can be structured so that they are immutable – we’ll talk about the security aspects in a second, I’m sure – they provide this independent reference point that has heretofore been provided by auditors and broker-dealers. There are some pretty exciting developments on the horizon, across multiple industry sectors.

Eve Picker: So, you really are at the cutting edge. It’s really not- it’s not found a path yet in the everyday world, except as cryptocurrencies, which are kind of a little bit of a gold rush, I think, right?

Sandy Selman: Cryptocurrencies were a big gold rush and, unfortunately, a huge distraction for government and the public to understand what blockchain really is. Fortunately, that gold rush ended in what they call the Crypto Winter of 2017 and ’18, and things kind of came back down to earth. Projects like the JPM coin, although you could call the JPM coin a cryptocurrency, I prefer to call it a digital currency, because it doesn’t have that tarnish of the whole crypto thing that went on; the craziness in 2017. Actually, it bears mentioning – why do they call them cryptocurrencies to begin with? Because blockchain technology is underpinned by cryptography, the science of cryptography. So, that’s probably where crypto came into play here.

Eve Picker: Interesting, interesting.

Eve Picker: Be sure to go to EvePicker.com and sign up for my free educational newsletter about impact real estate investing. You’ll be among the first to hear about new projects you can invest in. That’s EvePicker.com. Thanks so much.

Eve Picker: You told us about insurance, and securities, and all sorts of ways that it might be applied to real estate. Can you tell us about a project that you’re tackling right now at CPROP that we can sort of walk through and see how it works?

Sandy Selman: Yeah, no question. So, I think the one, probably, that’s the most relevant to the impact-investing space is we are preparing to launch a platform that will be a specialized platform for the listing, and the posting, and eventually the trading of – and every word here is important – real estate-backed security tokens. Why are all those words important, I guess, is the question.

Sandy Selman: So, in general, blockchain has two kind of broad uses. One has to do with the validation and time-stamping of data to create audit trails, and the other broad application is in the creation of digital currencies, which are essentially like digital twins of what they initially called fiat. So, fiat currencies would be dollars, euros, what have you.

Sandy Selman: The world of real estate finance is on – I believe, personally – is on the precipice of a sea change in the way properties will be financed because the efficiencies and the cost drivers for transacting, and fundraising, and such, through the use of digital currencies, are so incredibly significant that it’s creating this sort of persistent pressure for companies and regulators to work out how to bring these business models into existence to unleash the power of the onset of this digital-financing world that we’re now stepping into.

Sandy Selman: The project that I wanted to talk about is really kind of at the forefront of that transformation. Hopefully, we’re on the leading edge and not the bleeding edge. The bleeding edge is not a good place to be … We’re not the very first company to try this, but we’re going to try and come to market with a practical implementation that falls well within existing securities regulations that has a user interface and a user experience that is going to be very comfortable for mainstream retail institutional investors. We’re going to try and have our cake and eat it, too, here, with this project.

Eve Picker: Wow, interesting. You know that I’m really interested in impact in the real estate world, and I’m wondering how you think blockchain, or even cryptocurrencies could be best deployed, I suppose, to make impact investing easier?

Sandy Selman: Well, to provide … I guess the sort of broader question is what can projects like this do to support impact investing, and intelligent real estate investing, which is, I know, near and dear to your heart, and near and dear to my heart, as well? Here’s the answer to that question. The answer is that once you make the transition into the digital world of finance, one of the immediate benefits is democratization; meaning that you can make that asset class – commercial-property investing, or whatever type of property investing – you can make it accessible to a much wider range of investors.

Sandy Selman: I’ll give you two specific examples. One is that when you work in the digital world, being able to interact with investors globally becomes greatly facilitated. Essentially, any investor with an internet connection that qualifies to invest in whatever it is that you’re doing can now participate; whereas, when you’re working in the fiat world, in the conventional world, it’s just a lot more cumbersome. There’s paperwork; there’s a lot of friction associated with getting an investor [cross talk]

Eve Picker: Yeah, there’s a lot of … It’s not even the paperwork; it’s actually the banking systems. It’s very difficult coming up with a solution for sending money back and forth to an investor who might be in Italy-

Sandy Selman: Correct.

Eve Picker: -which is very difficult.

Sandy Selman: Yeah, it’s clunky. When you’re operating in the digital world, if that Italian investor can get their euros- deposit their euros into a bank that is connected with a secondary trading platform, it’s very easy, at that point of deposit, to essentially create a digital twin of that euro deposit. That becomes, essentially, their currency with which they- or the medium by which they can then acquire security tokens that represent undivided interest in property, or within fund, or however they’re structured-

Eve Picker: Even better, the developer, or the issuer can then, when they make distributions … Let’s say it’s a quarterly distribution that they need to make, if they can very simply send the funds back to that investor by the same platform-

Sandy Selman: That’s exactly right.

Eve Picker: Yeah, and that’s really probably one of the most difficult things.

Sandy Selman: Yeah. So, these are the sorts of cost drivers that are creating the pressure to move this- to sort of push this digital phenomenon forward. The other aspect of democratization, in my view, is that- there was something like … According to this report I read this morning, there was over $900 billion in assets under management in U.S. private equity funds that were focused on the real estate at the end of last year; almost a trillion dollars. By and large, those funds are accessible only to investors that have the ability to put up pretty high minimum investments.

Sandy Selman: In the world of digital finance, because the costs are so much lower, these security token offerings … And I keep saying security tokens, because these undivided interests represented by digital currency that we’re calling a token, for the lack of a better term, are securities by any sort of assessment of U.S. securities law. They fall squarely under the Securities Act, that’s why we call them security tokens. If we have time, I want to talk about another topic related to that, about utility tokens. But sticking on security tokens for a second, because the costs of issuance are so much lower, and the cost of transacting is so much lower, an issuer of a security token can structure their offering so that it’s accessible to investors with much lower minimums; thereby sort of promoting democratization.

Sandy Selman: A good application of this, in the impact world, is supposing you’re involved in a development in Pittsburgh that’s an impact type of a project, and you want to attract capital from local investors in the community who really want to be supportive of that project, it’s therefore possible … You’re doing this, I know, with your Small Change platform. It then becomes efficient to be able to allow those investors in, provided they qualify with whatever part of the securities regulations the security tokens are issued under. It provides a very easy and low-cost way to allow those investors in, without requiring them to be subjected to a $250,000 minimum, for example, in a PE fund.

Eve Picker: Right. I have to be convinced, because we’ve got a pretty easy way for them to get in, using ACH, right now. I think, for me, I’m going to push you a little bit on this. I think the beauty of it is in foreign transactions, which are really difficult, and the ability to be able to tie information about each investor together, so that you don’t lose it, right? You might have W9 information, and you have to issue a K-1; you need to keep track of the percentage of the total investment pool that they have invested, so you can distribute the correct amount to them. Those things are really super-time-consuming and require someone with quite a lot of skill to keep track of them and make sure everything is correct. That’s what I’m hoping that blockchain can solve. Am I wrong?

Sandy Selman: Yeah, the distributed ledger … No, no, you’re not wrong at all. The distributed ledger does that, by definition. It captures every element of that workflow that you just mentioned – keeping track of people’s respective ownerships; keeping track of the way that dividends should be apportioned. I think, to your point on the ACH, yes, you can allow people in – send $1,000 by ACH – but now, you’ve got this $1,000 investor in, and there’s this carrying cost of making those distributions, importing, and so on. When you’re operating in the digital world-

Eve Picker: That’s the expensive part; it’s the carrying cost-

Sandy Selman: Right. Exactly.

Eve Picker: Our issuers are always thinking about the lowest minimum they can allow, because we can accept $10 by ACH, but then they have to manage that $10 investment, and that’s pretty excruciating, so-

Sandy Selman: So, in the digital world, if that administration of that $10 investor can be automated, then it doesn’t become so out of reach.

Eve Picker: That’s right. Okay, now you’ve convinced me.

Sandy Selman: Okay, good.

Eve Picker: So, that’s how it might be applied. Let’s look at Small Change. We are a funding portal, at least for one of our offerings; so regulation crowdfunding. We have to abide by many different rules, in order to let people invest small amounts; fractional investments. We sort of put the whole securities package together. Right now, we are accepting investments by ACH, and some bigger ones by check and wire. What would it look like to convert an offering on our platform to blockchain, or cryptocurrency, instead of accepting ACH?

Sandy Selman: In the ideal world … I’m going to talk about the ideal world, and then I want to dial it back to the practical. In the ideal world, Small Change would be a what’s known as an ATS -an alternative trading system – which is a form of exchange. It’s a term of art within the securities world. Investors would deposit their U.S. dollars into a bank that will be part of this ATS, or a settlement agent; again, fully regulated. The depositing of those dollars would result in the creation of sort of a digital equivalent on your digital platform which, again, would be the medium with which those investors could acquire security tokens representing undivided interest in the [subject] properties or portfolios.

Sandy Selman: Then, whenever there’s a dividend that’s to be distributed with any of those income-producing properties, the blockchain provides you with a perfect record of who owns what, so that the dividend can be readily distributed digitally to those accounts on a pro rata basis, according to each investor’s ownership in that particular security token. Then, when an investor wants to withdraw, they can simply- their holdings in their portfolio of security tokens are then correlated with the U.S. dollar account that resides with that custodian banker or settlement agent.

Eve Picker: Okay, that’s pretty easy.

Sandy Selman: So, at any time, they’d have a way to withdraw cash if they needed to or deposit more cash if they want to. There’s this dividing line between the fiat world and the digital world that remains very, very distinct. All the transacting occurs on the digital side, but the cash in and out still occurs the way it does today on the fiat side.

Eve Picker: Okay. Well, you, and I are going to have to talk about this outside the podcast, all right?

Sandy Selman: Yes. But I mentioned, that’s in the ideal world, so I just want to dial it back to the practical world … There are still a number of important operational details that need to be worked through with the SEC. The SEC- the state of regulation at the SEC is still at a fairly early stage regarding how the treatment of these digital platforms will exist. They’ve issued some guidance on it. It’s not super-specific, and there are series of no-action letters and things of the like that are being issued or will be issued in the future that will provide more, and more specificity as to how to structure these things so that, from a regulatory standpoint, everything is compliant.

Eve Picker: Yeah. I’ve been watching that. That’s why I’ve been staying away from it.

Sandy Selman: Yeah, but I think our goal is to try and sacrifice functionality, and operability for speed to market. What we’re trying to do, and working through it with the SEC, right now, is we’re trying to touch bottom on how do we bring to market a system that is compliant, even if we have to sacrifice … We’re not going to be an ATS, obviously, out of the gate – the bar for that is pretty high, in terms of cost and time to get that approval – but we’re looking to touch bottom with them, early on, as to how we can come to market with what would be known as a bulletin board for this sort of special-purpose platform that’s focused specifically on real estate.

Sandy Selman: Now, like I said, we don’t want to be on the bleeding edge; we want to be on the leading edge. There are companies that have gone before us and have gotten the approval to operate as an ATS from the SEC and have digital currencies on their platform. They’re not specific to real estate, but they have been approved, so there are go-bys that are out there, and that’s a very, very important thing to consider. It’s what gives us confidence that the path that we’re on is going to ultimately bear fruit.

Eve Picker: Interesting.

Sandy Selman: We’re not the first.

Eve Picker: What do you think all of this is going to look like in five to 10 years from now?

Sandy Selman: Wow, that’s a really good question. I can tell you that every money-centered bank that I’ve spoken to has an internal department that is focused on digital securities and blockchain applications. They don’t talk much about it. My personal view is, I think five years is probably a good number, but I don’t have a crystal ball, obviously. But I think that a greater proportion … You’re going to start to see platforms pop up all around the world that are these digital platforms that create this paradigm that I was just describing, where there’s a portal for getting fiat currencies into a system – whatever that fiat currency might be – and then, a digital equivalent which is where all the transacting and the reporting takes place.

Eve Picker: Do you think this is really going to impact the way our banks look? Are banks going to become a ATSs?

Sandy Selman: You could … Yes, you can rest assured that banks, and the investment banks, they’re not going to let this opportunity go by and have new entrants step in there, and not participate in it … I think you can be confident in assuming that the traditional financial system players are going to be front and center in all this [cross talk]

Eve Picker: I mean, that’s a good thing because they have a reputation and have been in business for a long time, so that means that the general public will become more, and more aware.

Sandy Selman: Yes. It’s sort of the next evolution in the way the financial markets operate. It’s good in the sense that it lends itself to greater efficiency, which is obviously more cost efficiency, and greater transparency, and greater security.

Eve Picker: Yeah. Interesting. You talked about the regulatory hurdles. What are the perception hurdles?

Sandy Selman: The perception hurdles, that’s another really good question. The perception hurdle is that people hear crypto, and they run from the room screaming, with their hair on fire, because of all the well-publicized hacking incidents. People hear bitcoin, and they just shudder and this kind of stuff. There’s kind of two issues here, I think, that are uppermost in most people’s minds.

Sandy Selman: On the hacking, the items that are hacked, and the famous hacking incidents tend to be the wallets rather than the blockchains, themselves. I’m not going to say that there’s never been a blockchain successfully attacked, because that’s not the case, but there are ways to structure blockchains to make them virtually impossible to hack. I would like to say impossible, but I’ve been told many times never say anything is impossible.

Sandy Selman: Wallets, where tokens are often held, are vectors for attack. Think of it like this – an electronic wallet is nothing more than sort of like a file folder, in a sense, on your computer, that you keep on your computer, or you keep on an exchange, or you keep on an external device. If you are sloppy with the private key, which is just a fancy password, then anybody can …

Sandy Selman: If someone is able to get your private key because you’re sloppy with the way you keep it … Let’s say that you store your private key in an Excel file that’s on your computer, and your computer gets attacked, and someone finds that file, and they’ll have your private key, you’re done for. Once that private key is compromised, people can get access to your wallet. They can take your tokens out of it and send them into the ether, and you’ll never find them again, because even though you can see where all the transactions are on the blockchain, the wallet ownership is anonymous; it’s anonymized, so you don’t know who owns the wallet.

Eve Picker: But that’s personal security. That’s like deciding whether to leave your front door unlocked or not. That’s not so much an issue of blockchain as it is of people’s behavior, right?

Sandy Selman: That’s correct, and I think that … Again, my personal view is that, in the future, institutional investors … By the way, this is anathema to institutional investors because they’re used to dealing with banks and other depository institutions where, if something … If the bank gets hacked, there’s insurance, and the money can be recovered, and so on, so forth. In the digital world if a wallet gets hacked, good luck. It’s the Wild Wild West.

Sandy Selman: My personal view is that the way this is going to get worked out is that there won’t be wallets, and there won’t be tokens to worry about that because of [attack]. The blockchain is really just being used as a method of accounting more than sending tokens from one place to another … This is a nuance that’s lost on, I think, on most people that I speak with. It’s a distributed-ledger technology, as I said before, that provides this accounting mechanism. So, you can make adjustments to the accounting based upon how transactions … The accounting is automatically adjusted as transactions occur. Depending upon how the platforms are structured, you don’t necessarily need to have wallets with tokens sitting in them. It can be just a method of accounting.

Eve Picker: Yeah, I mean, I can really see the value for … If you have 1,000 investors, that could be enormously useful.

Sandy Selman: Yes. That’s one big perception problem. The other big perception problem is people hear cryptocurrency, and they think of Bitcoin, and the wild price fluctuations of Bitcoin. The price of Bitcoin- ask 10 people what moves the price of Bitcoin, and you’ll get 10 different answers. It’s kind of nuts. It’s not correlated to anything. The same is true for all the other cryptocoins that are out there.

Sandy Selman: In this world, this world of digitized real estate finance, we’re not subject to those same … That whole paradigm just doesn’t even … It’s not even relevant because the digital currencies that are used to mirror an investor’s fiat deposit are not going to be … It’s not going to be Bitcoin, or Ethereum. They’re going to be special-purpose utility tokens that are just there as a marker to mark the accounting of what that investor’s entitlement to those fiat deposits with that custodian, or that settlement agent are. They don’t have a price attached to them. They’re just there as a marker, if that makes any sense-

Eve Picker: I think your description as digital twins of actual fiat money is really a great way to think about it. It’s just a little clone of the actual cash, right?

Sandy Selman: It’s a digital clone, exactly.

Eve Picker: Whatever the cash is worth, that little clone is worth the same amount.

Sandy Selman: Exactly.

Eve Picker: Yeah, I like that. There’s another coin out there, stablecoin. I don’t know if that follows the same principles?

Sandy Selman: No …. Yes, and no [cross talk]

Eve Picker: Maybe I shouldn’t have asked.

Sandy Selman: There’s a class of coins that are called stablecoins. Tether, for example, is one of the more well-known ones … There is a token out there called the USDT, which is a Tether coin which is pegged to the U.S. dollar.

Eve Picker: Right.

Sandy Selman: But … All right … And Facebook, with their Libra project; they want to come out with … Libra is going to be tied to … I’m not 100-percent familiar with the Libra project, but as I recall, it’s tied to a basket of currencies. The problem, or the potential fly in the ointment with those stablecoins is that the coin needs to be backed by something. If there’s a run on USDT, for whatever reason, then it needs to be backed by enough U.S. dollars so that the correlation stays intact.

Eve Picker: Right.

Sandy Selman: That’s sort of the chink in the armor there.

Eve Picker: Interesting.

Sandy Selman: When we started ideating on our platform, initially we thought maybe USDT’s something that we could use. Then, we quickly realized that that wasn’t going to work, because any stablecoin that isn’t backed by the full faith and credit of a government issuer, like the U.S. dollar, potentially has that flaw.

Eve Picker: Yeah, that’s interesting … This has been really fascinating, and I have three sign-off questions, but I think you said you wanted to talk about one other thing.

Sandy Selman: Yeah, I wanted to talk about one other thing and that is I wanted to touch very quickly on utility tokens and their use in this space of impact investing, and affordable housing. So, we’re working on a couple of projects now where, again, we take advantage of the accounting aspects of blockchain to create some value within this- let’s call it the affordable housing space.

Sandy Selman: One sort of obvious application is in the rent-to-own industry, which is an industry that is not known for … Well, let’s put it this way. There have been a lot of instances where the accounting is between landlords/property owners, and the tenants have kind of gone astray. Blockchain provides a superb solution to ensuring that the accounting on a tenant’s journey from renting to owning is well-documented and is cast in concrete. You can’t mess with it. You can do this with simply just using utility tokens, which are not a security and therefore, can be implemented without having to file a registration statement, or anything like that.

Sandy Selman: The other application for utility tokens, which I think is really interesting, in the affordable housing space is the ability to create reward systems that incentivize tenant behaviors that are favorable to ownership; for example, paying your rent on time; paying utility bills on time; for master-metered buildings, keeping your utility consumption below a certain level; things along these lines … The utility token, again … Do you need blockchain absolutely to implement those systems? Maybe not, but blockchain makes the implementation of those systems super-easy, super-transparent, and secure, and therefore, trustworthy because the data is held in an architecture that’s outside the control of the ownership of the property, and therefore, it’s more trusted. I just wanted to throw those out there real quick-

Eve Picker: In other words, pay your rent on time, and you get a token, which you can put towards something else or-

Sandy Selman: Yes, exactly.

Eve Picker: That’s really interesting. Are you working with anyone on a project like this?

Sandy Selman: Yes we are. We’re actually in discussions with two different large companies about this. They both have their own views as to how they want to utilize those … How they’re going to be … What the reward is for accumulating the tokens. You’ve got to be careful to steer around them and not make the reward systems such that it turns that utility token into a security, but I think that’s pretty easy to do, as long as you’re mindful of it, where the trip wires are.

Sandy Selman: It’s, again, something that I think you’ll start to see pop up. These two companies that we’re working with are pretty serious about implementing this, and I don’t see any technical reasons why it couldn’t be implemented. So, as long as we structure it so that we don’t hit those regulatory trip wires, I don’t see any reason why it won’t be implemented, so, I guess, stay tuned on that.

Eve Picker: Wow. So, it’s a brave new world when it comes to banking now.

Sandy Selman: Yeah, yeah. I feel like I’m 20 years old again. It’s great.

Eve Picker: Well, it sounds like fun, Sandy. So, I need to ask you three sign-off questions, which are probably not exactly what you think about all day, but I ask them of everyone, so I’m going to ask them of you. I want to know what you think is the key factor that makes a real estate project impactful to you.

Sandy Selman: I can answer that by relaying an experience that I had last year. The company that’s redeveloping the Tampa waterfront is a company called Strategic Property Partners – SPP. Their head of development, I had a conversation with her that really kind of struck me. In redeveloping this waterfront area, downtown Tampa, which should be a great … The natural attributes of that real estate are such that … It’s proximate to the downtown core; it’s got water around it; there’s an island; there’s all kinds of natural attributes … There’s a highway that goes straight to it.

Sandy Selman: What they’re trying to do is they’re trying to create a development, which, it’s a huge mixed-use property development, and they’re trying to design it with livability in mind, where people can feel connected to the spaces the open spaces that are created. The emphasis really is on the experience more than the … Or of the priority of functionality, which I think is a really interesting approach to development. These urban and semi-urban developments, which I think are lacking, there’s the high demand for because of commute times, which is an incessant problem.

Sandy Selman: I mean, I live in a New York suburb, and we deal with this every day. It’s just kind of absurd the extent to which it degrades the quality of life having to sit in traffic for hours on end each day. It’s very frustrating, and unproductive, and expensive. Creating these communities that are urban and semi-urban, where people can work, and they can live, and they can have a quality of life, and feel connected to the community and, therefore, to one another, I think is … To me, this is something really, really important.

Eve Picker: Yes.

Sandy Selman: By contrast, not to pick on it, but I used to work in a place in Stanford, Connecticut, which, to me, was sort of the antithesis of this. It’s not walkable; you’re constantly having to cross major boulevards. There just was no sense of community, at least at the time that I worked there. I thought, gosh, this place could really stand a makeover to make this a more comfortable place to be. It was a place I dreaded going.

Eve Picker: Yeah, yeah. I just actually read an article about the suburbs starting to become little transportation nodes around railway stations and reinventing those places for remote workers. They’re kind of new little towns that are popping up. It’s fascinating what’s going on at the moment.

Sandy Selman: Yeah.

Eve Picker: Other than raising money, in what ways do you think involving investors through crowdfunding can benefit impact real estate development?

Sandy Selman: It kind of goes back to my democratization comments. Finding a way to reach that target audience and reducing the friction as much as possible, and the costs in interacting with them, to me, is the pathway to liberating more capital. I’m constantly amazed, actually, at how successful a lot of these GoFundMe campaigns are for causes, like someone has a terrible health problem in a family, or an accidental death, or some family tragedy; how quickly I’ve seen families, through GoFundMe campaigns, raise copious amounts of capital to deal with medical expenses and the like. If it works for that, it should be able to work for impact investment.

Sandy Selman: I think that the more the local community to an impact- a development can be tapped for capital, it creates more stickiness and a higher likelihood of success for whatever that local development is going to be. I think in this strange point in U.S. history, where we’re more divided than we ever have been, as far as I know, I think these political divides are tearing at the threads of community cohesiveness. I think this is one small way that can sort of fight back against the tendency to become separated from one another, if we can remain connected to our communities because we’re both living there; we’re working there; we’re playing there, and we’re invested there. That’s a very interesting paradigm, at least from my standpoint.

Eve Picker: Yeah, that’s true. You got me all excited. Then, finally, what is the one thing about real estate development in the U.S. that you would like to see improved?

Sandy Selman: More mindful development. Again, the comments from this development professional in SPP really run true with me. I travel quite extensively, and I see things going up … Take my hometown of New York City – I see high rises going up there, left, right, and center, with total disregard, in my view – I’m not involved in them, so it’s easy for me to throw rocks at them, I guess – but, in my view, total disregard to the impact on the community, particularly around transportation.

Sandy Selman: I thought that this whole brouhaha over Amazon and them not going into Long Island City, for example … Long Island City is an area that is massively under construction and has been, now, for the last couple of years. Consequently, the traffic around getting through and around Long Island City has become absurd, and the public infrastructure, transportation infrastructure, has not been touched – the subways the trains, and such.

Sandy Selman: They’re still the same subways and trains that existed before- when this land was brownfields. That kind of development just- it just makes me crazy, and I just don’t understand how urban planners and city planners can engage with these developers developing these massive developments that are going to bring literally millions of people to live and to work in these very, very congested areas without, at the same time, addressing the ripple effects, particularly on public transportation.

Eve Picker: I think this may be your next calling.

Sandy Selman: Yeah, maybe. Like I said, I was an infrastructure junkie, earlier in my career, so this is something that particularly gets me going.

Eve Picker: Well, Sandy, thank you very much for joining me. I really enjoyed chatting with you. We’ll sign off, and I’ll talk to you soon.

Sandy Selman: Yeah. Thank you very much.

Eve Picker: That was Sandy Selman, founder of the startup, CPROP. I learned about the power of the blockchain and how it might be unleashed on real estate. Accounting and auditing trails would be handled fluidly, and blockchain would support fractional investment, which is dear to my heart. But I also learned that blockchain is a nascent industry, and it’s too early to point to some really purposeful applications.

Eve Picker: You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate, while building better cities. Thank you so much for spending your time with me today, and thank you, Sandy, for sharing your thoughts with me. We’ll talk again soon, nut for now, this is Eve Picker signing off to go make some change.