Adam Torres and Johnney Zhang discuss investing in real estate.
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Show Notes:
Tokenizing real estate is one of the ways real estate investors are increasing their liquidity. In this episode, Adam Torres interviews Johnney Zhang, Founder & CEO at USP and Primior Asset Management. Explore real estate investing, tokenizing real estate and the future of Web3.
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About Primior Asset Management
Primior is an innovative real estate private equity investment firm in Southern California. We seek to generate outstanding returns for both institutional and individual investors by enhancing the value of the properties in which we invest through cutting-edge strategies. Our investments include commercial real estate, hospitality, and luxury residential properties. Primior manages over $1 billion in assets through direct investments, partnerships, and providing advisory services to clients.
Full Unedited Transcript
So Johnny, first off, just to get us kicked off I, we’re going to go further into, of course, USP, we’re going to go into some other topics, but I just want to start off by getting more into like real estate in general, like where did real estate and your journey with real estate, where’d all that begin?
Okay. First of all, thank you for having me here. And then Jody’s out. So real estate started as my you know, my family business, my family started as a real estate developer back in China. And then I also love real estate, so I started with a family helping them building their real estate money back in China.
And when, once we moved to us, we started building our, my own real estate company. Hmm. Since 2012. So it’s always been, you know, family blog. Mm-Hmm. So sometimes people run from the family business. I ran from the family business, probably some other people in here that run from the family business. What kept you in the game?
Like, how’d you know it was gonna be your thing? Okay, so I just like how you can build something that will last longer than you do. So, if I build something nice, like, I’m actually going to watch your real estate. My family is more into traditional, like long term real estate, commercial real estate.
I’m more into luxury real estate. So it’s, it’s all those, all those are within real estate. I’m in a little different sector of real estate. But I like to build something that’s nice, that’s lasting, and where people appreciate it. I like that feeling of achievements, because it’s really nice, people love enjoying, and then of course there’s more money there too.
No one in this room likes money, right? Yeah, I can tell, nobody likes money around here. So, the idea in this concept of, of, of web 3, and this coming to the forefront, and then just, just For people that don’t know my background, so I mean, I was in finance for almost 14 years. So, you know, I was, I can tell you my Bitcoin story.
Like when, when I learned about Bitcoin, I was at a trading desk and around that time, the Iraqi Dinar was also being traded. There you go. So I remember like thinking and kind of melding these two. So the real finance geeks in here may remember this time period. But I didn’t know, I didn’t understand.
And because of that, it took me a long time to come around to really get the thesis and to really fall in love with, with a lot of that side of finance and even just the potential. Like, where did that, like, when did you see that connection? Did you get it immediately or, like, what was your build up? My journey was similar to yours.
I first heard about it from a friend of mine. Told me to invest in Bitcoin. That was in 2012. like, you’re out of your mind. Yeah, did you think he was, like, oh, that’s a great idea? He was like, no, don’t give my father a thing of a scam, right? And then I didn’t really invest in it. I’ve been watching because he’s mentioned it.
So that means you were a prudent investor, I understand, in the beginning. So I’ve been watching how Bitcoin evolved, right? And then I didn’t get into it until, I think, end of 2021. That’s when I see, okay, adoption is really there. And now, like, the blockchain technology now is proven to be useful. So I think that can actually benefit real estate.
So that’s when I started looking into how can I use the blockchain technology, not the Bitcoin, but the technology itself. To make real estate better. So that’s why I decided to do that. And then, I was actually, initially, I was looking for other projects doing the same thing. It’s like, hey, every project, they did this, like, this project to make real estate investment, like, easier and better.
And I couldn’t find anyone to do this correctly. I was like, you know what? I’m gonna do it myself. And there’s, if nobody’s doing it, maybe there’s a good opportunity there to make money. So, I did it myself. Any entrepreneurs in here? Oh, when you try to solve your own problems. Sometimes it works very well.
Sometimes there’s a lot of pain in that, right? So you’re, so now you have this idea. You have this idea. You’re, you’re, you can’t find somebody else or at some area to do what you want to do. What’s your next step? Like, how does that unfold? Take us on that journey. So, so the most, the main reason I couldn’t find anyone that would do it correctly because a lot of people doing tokenization did not do this in a compliance way.
So a lot of people using tokens that are not really in compliance with existing security laws. That means that there could be a backfire from, you know, people going after SEC. We all know what happened to CEC and Binance. Right? So I want to do this in a legitimate way that’s uncompliant because of the laws.
So, I could find an employer who does that. It’s because of the smart contract they have. It does not, you know, allow you to, you know, verify the standards of the recipients. You have to make sure they’re all KYC. You can’t do that with the RC 20 standard. So, a lot of the technology back then was available but nobody’s using them directly.
So, I basically said, look, I’m going to do it correctly, I’m going to do it for myself, then I can go through this same, you know process, and then to everyone else, as a service, as a software. So, so, now I can actually help other developers, real estate owners, to tokenize their assets. Make sure it’s in compliance with it.
That word, tokenizing. Let’s start basic. What does that mean, to tokenize an asset? Oh. So tokenizing is basically is a different form. I say, if you bought a stock, and then, what they’re going to give to you, they’re going to give you stock certificates, right? To prove your ownership, right? So tokenizing means, instead of giving you paper certificates, you get a digital token that lives on the blockchain.
So, it’s, it’s, it’s on public ledger, so it’s never going to go away. You can always delete that. It’s always going to be there. So it’s more transparent. It’s more secure. Right? Now, the most important thing is, now that you have a token, you can now trade it peer to peer on the blockchain. And you can’t really do that with a stock certificate in a paper form, right?
Yeah. So that’s how I, I, I would explain it. And what does that, what does that mean for liquidity? Like, what does that mean for liquidity? So, so it keeps the equity you never had before, right? If you have a stock certificate, like say you bought a company, a private company give you a stock certificate. You can’t really sell them.
Right, you can only trade paper stock certificates, and people can’t authenticate that stock certificate. Maybe it’s fake, people don’t believe me, right? But if it’s on blockchain, now people can verify that it’s on blockchain, and they can easily trade it peer to peer. So it gives you better liquidity. It just basically has the whole, I guess, after investment experience, you can now trade it.
You know, it gives you a million dollars, when you can’t do that before. Right, so as an example, if you have a stock. Now, say you bought Apple stock. You bought any reads, then you really actually don’t own the stock, right? You have accounts with the brokerage. The brokerage is the one that actually has possession of the stock, right?
They’re the one who holds the possession of the stock. They’re the one who are custodians, right? So you can’t really give that stock to anybody else. You can’t give the stock to your relative in other countries or anywhere. You can’t. The only option you have is to sell the stock. And then get cash, withdraw the cash, and then give you something that you want, right?
But now, imagine that the stock becomes a token, and you sell a blockchain. So you can actually now withdraw the stock into your wallets on blockchain, and you can give them all at once, all at the same time. And so relating that to real estate, like, if somebody, like, that same thought process of, of liquidity, but now tokenizing the real estate, how does that apply?
So, there’s, there’s, it’s always tokenized real estate. People do that with NFT, they tokenize the entire title of the property. I do that with the fractional. So, think about like a real estate like a REITs, a real estate that’s in trust. Where you tokenize that. So you basically instead of getting your share in paper form, you’re getting your share in the digital token form.
It’s the same ownership, fresh ownership you’re getting when you invest in your leads. And now you can actually, now you have the ability to self custodian your own assets. You can now give to anyone you want 20 percent on blockchain. You just make, make the traditional investment experience better. So let’s go further into the platform that you’re creating and what that looks like and even the marketplace.
So now that we’ve kind of built out what tokenizing means, we built out, you know, some idea or some use cases for why you’d want to just tokenize an asset just in general. So now going to your, going to your Oh, there you go. Going to your your marketplace and what you’re creating. Let’s go further there.
So the marketplace is basically where any real estate sponsor developer can come here and then use my platform to tokenize their properties and then do that, like self serving themselves, do that on the platforms, tokenizing it. name their ticker, they can choose what their ticker the token is, and they can upload it to blockchain.
We use Ethereum, so we have Ethereum. Then once it’s uploaded, they will actually use our KYC database, and then they can start issuing the token to their investors. The investor can now trade it, actually once they bought it, you can now trade it. Peer to peer as long as the investor is looking at our KOC database.
Because we do have a resolve to make sure it’s going to save our clients. And then they can also offer the property safe on the private markets. You sell those tokens to our investor, our marketplace, so they can raise money on the private markets. What does that do for, for raising money? Like in terms of like accessibility, whether it’s to the, You know, the developer that wants to get to the money or the investor that wants to get to the developer.
Right. So, so this is basically similar to like a real estate crowdfunding platform. You have heard about it, Cadre, cross streets, all these kinds of players. It’s similar to that, except we are different because we’re making it tokenized now. So, say if you, if you want to invest in private real estate, now commercial real estate would cost you millions of dollars, right?
And you can’t really just go out and buy yourself unless you’re really wealthy, right? If you’re just like a credit investor, you have like a, you know, two, three hundred thousand dollars laying around, you want to invest, you really can’t do anything with it. So People like that will go to crowdfunding platforms.
They will find they will go across properties. There’s a lot of investment opportunities that could be developed, could be value added, could be a stabilized property. You can choose your strategies. If the minimum investment activity is 25, 000 or more, so you can actually place money in different properties and just invest.
And then it’s, it’s literally the same as the other one, except when you invest in traditional rest confined platforms, You really can’t sell your shares. So the holding period is normally 5 years or longer. And with crypto, everything is being sold publicly right now. Who wants to have their money locked up for 5 years?
Like, nobody wants to, right? I personally, as a black stock owner, my money is locked up for 10 years. I hate it. I couldn’t sell it right now. I was not trying to sell it today. I couldn’t sell it. So nobody wanted to buy it. That’s the problem. It’s like, on the private market, there’s no liquidity at all.
There’s no one wanting to buy your shares. LP interest in those deals. So, now, if you tokenize it, and you have a marketplace in a lot of people to trade those tokens, and then now you have a liquidity that you never had before. So people get Most importantly is, if a credit investor, you bought those shares, after you hold for 12 months, you can actually sell them to an on credit investor.
People don’t know about that. But you can actually do that. So So most crowdfunding platforms are only available to credit investors. So if you are not, if the net worth is not over a million dollars, you’re not eligible to invest in real estate. So how do you get in? You can’t get in. The token is real estate now.
You actually go ahead and go into the marketplace, to buy those tokens that represent Ownership of those real estate. Yeah. But you are qualified to buy it. ’cause after four month’s, locked, locked to sell to on credit investors. So it gives the, the credit, invest school, invest in private market. An option you sell in the sell market, maybe you make more money on in the short term.
And they’re trying to give the uncredited investor opportunity to invest in the real estate that was never available to them before. And then because it’s tokenized, so it’s not only the U. S. investing in mass, this is a global investor. You can be in Africa. It will still become a professional landlord in the U.
S. property that was never available before. What, what’s been the response that you’ve received in this for whether it’s from the developers, the institutions, or, you know, the investors, like what kind of response have you gotten towards this? So the biggest hurdle is stellar liquidity, right? And everybody thinks it’s a good idea.
We loved it. It was like, okay, well, how do I know I can sell this afterwards, right? The liquidity is a big problem. And another problem is the regulations. SEC still haven’t had a clear regulation about tokenization. But I’ve talked to a lot of people who are in the LCC because they don’t plan to. Because they don’t need it.
Because they think their security laws that was passed a long time ago It’s, it’s came out to regulate whatever is there. So, based on how we test, 99. 9 percent of the crypto project out there is illegal. So, so, I don’t think SEC was under a lot of pressure to regulate anything that’s, you know, like, like this.
So, we did our platform in a compost way with the existing laws. And I think the institution actually starts adapting this type of organization with existing security law. And I’m like, oh yeah, that’s good Up to the regulation, they’re not doing that anymore. Blackstone I should know this, BlackRock, and Jacob Morgan both started their own tokenization process.
They did it on their own market funds. So they didn’t do it on real estate yet, but I think these top organizations really like to do it on real estate and private equity the most. Because they never had it before. A multi market fund is already liquid. Right. That makes a lot of sense, and as these bigger players get involved, then the, you know, the other investors, the masses, other things like that, it seems like the market would open up for more people that want to invest in it.
Am I off on that, do you think? I mean, it makes sense, right? So if you ask people who invest in crypto, they probably have like less than 5 percent investment. Yeah. Right? If you ask people who want to invest in real estate, you probably have over 90 percent of people saying, hey, I want to invest in real estate.
Right? It’s more tangible, it’s more it’s safer, right? It’s not as volatile, right? So people just, like I said before, it’s like, they’ll be shut out of the real estate market. They have to account for 45, 000 to expect the mortgages to go higher. And their commercial real estate is even higher, you know, like, better at the entry, right?
They just can’t get in. And then, you know, it’s, it’s, it’s, it’s, it’s, it’s, it’s, it’s, it’s, it’s, it’s, The real estate private, real estate private funding platform is, is like only available to private investors. So, I think this is really going to change the game. Allow the average Joe to get in and to be a part of the real estate, unless you can build a wall.
I mean, real estate, in my opinion, is the best tool to build a wall. Because it’s more stable, it’s more stable in real estate. It tends to depreciate over the long term. It’s more certain, right? The certainty is more important to me than, than the profit, right? Because everything else is stocks. Crypto, yeah, you can make a lot of money, but you can lose a lot of money, right?
But real estate is more certain. So this is, in my opinion, the best tool to build wealth. I think these tokenizations may help a lot of, you know, the average people, you see, like getting the real estate ownership gain. Start cuing them off. So Johnny, final question on my end. Your vision for the platform going forward.
Where many entrepreneurs in the room let’s dream for a moment. Where do you see this thing going? Give me the vision. Okay, so Yeah, the big vision. Come on. I want you on camera with the big vision. So, so the big vision is like I could, I want to I want to make USP the house brand for tokenization, that tokenize as much properties in the US as possible, and have the whole global investor, and use USP to get into real estate game, to build their wealth, to change their lives.
That’s kind of what I see on our label.
