The Innovators: RedSwan CEO Ed Nwokedi

In this series, Bisnow highlights people and companies pushing the commercial real estate industry forward in myriad ways. Click here to read Q&As with all the innovators Bisnow has interviewed so far.

Real estate is traditionally considered one of the most illiquid asset classes, available only to high net worth individuals and companies, but the invention of blockchain technology has begun to open the sector up to smaller-scale investors.

Tokenization, where properties are divided up into digital shares, offers a chance for individuals to invest in institutional-quality real estate assets. It's a relatively new way of buying and selling property — and one that is poised to take off in a big way, according to RedSwan CEO Ed Nwokedi.

Prior to founding RedSwan, Nwokedi had a successful career as a commercial real estate broker, first at Colliers International and then at Cushman & Wakefield, where he served as an executive member of the Global Capital Markets Group.

During his 16-year tenure at Cushman & Wakefield, Nwokedi sold close to $2.7B in commercial real estate transactions in Texas, making him one of the most productive brokers at the company.

Productive as he was, Nwokedi found that it became harder to make the same level of compensation each year, between more brokers entering the industry and a shifting emphasis on team assignments where commissions are split. But a lightbulb moment occurred in 2018, when a former colleague convinced him to attend a blockchain conference in Dallas.

“I was amazed by what I found at that conference, in terms of how blockchain was being utilized in different ways other than just cryptocurrency, in business,” Nwokedi said.

When the Securities and Exchange Commission approved and began regulating security token offerings a few months later, it was a sign. Nwokedi founded RedSwan that year with the goal of making commercial real estate more affordable for small investors.

Using blockchain technology, the RedSwan platform divides up a large asset’s value into smaller investment allocations, making equity ownership available to individual investors.

The company has spent the past few years building out the technology, while courting building owners to tokenize their assets. Nwokedi said RedSwan has about $2.8B worth of tokenized assets, and the firm is currently marketing $350M in digital shares.

“Our goal is to have, in five years, $60B worth of assets under management,” Nwokedi said.

In the space of a few short years, Nwokedi created a tokenization platform exclusively for commercial real estate, one of the first such companies and still a rare beast, that will allow small investors to potentially own and trade in billions of dollars of property. As the coronavirus pandemic raged, his company locked down the necessary tech and portfolio to begin trading. His efforts have earned him the title of a Bisnow Innovator.

This interview has been edited and condensed for clarity.

Bisnow: Why did you decide to found RedSwan?

Nwokedi: I was in the commercial real estate industry prior to founding RedSwan for 16 years. And every year, it seemed like it was harder and harder to make the same dollars, the same amount of compensation.

One of my associates from my previous technology company recommended I go to a blockchain conference in Dallas. And I was totally against it — I had no idea what blockchain was; this was in 2018. When I went there, I was really looking for how blockchain could be effective with real estate. Most people were there because they were looking at blockchain as it’s associated with cryptocurrency and Bitcoin. And I wasn't, because I didn't think coins were of value to me. I was looking at the technology.

I was amazed by what I found at that conference in terms of how blockchain was being utilized in different ways other than just cryptocurrency, in business. And that's when the lightbulb went off. Two months later, the U.S. Securities and Exchange Commission banned initial coin offerings, saying that they were malicious. But at the same time, they approved and regulated security token offerings.

That was really the critical moment where I said, “OK, now the SEC is getting behind the tokenization of assets as securities, and as long as you get your securities licensed, you can deal with this product.” So I decided that's the route we were going to go.

Bisnow: What has RedSwan achieved since it was founded?

Nwokedi: We officially became a company in April of 2018. Since then, we've been successful in creating our initial website, and our marketplace of the part of the website, which is where people can look at different properties and examine the numbers and evaluate the assets. And also, the regulated part of our website, the SEC part, where you have to verify your clients, accept payments and then transfer shares to investors. 

Those are three different components of technology we had to put together to make one platform. We did that successfully and finished the technical platform at the end of last year.

Bisnow: When did your platform start facilitating the transaction of assets?

Nwokedi: We started to tokenize assets and take on customers in early 2019. The technology was built, we had a platform where we could showcase the properties. And so my job as a real estate professional was to go talk to clients that I had when I was at Cushman & Wakefield, who are building owners, and convince them at an early stage in the business that they should tokenize their assets to make them more valuable.

That was a big responsibility, because most people had no idea what tokenization was, let alone blockchain. I had to educate a lot of these property owners of what the benefits are, and why they should be doing it now rather than later. And that was a challenge in 2019.

But we were able to at least generate close to a billion dollars with the properties. People said, “You know what? I like you, I know you, I'm going to give you a chance. You go ahead and show me that this is going to bring value.” So we were able to get initial clients that way, just from my relationships with some building owners.

Bisnow: How much property has transacted on your platform, to date?

Nwokedi: Not much was done through 2020, because the technology wasn't complete. The business plan was not necessarily to start raising capital, but to start raising products. You have to have the product in order to get people interested in the capital.

We needed to have a marketplace that has a lot of properties that have been digitized, to give the market options in what they can invest in. Different types of properties, different types of yield and different types of sponsors. And so that was really the goal while we were building the technology —  to get customers, who are building owners, and get them to pay us to put their properties on our blockchain. That's what we did in 2019 and 2020.

Today, we're sitting on about $2.8B worth of tokenized assets. We're marketing now, because all the technology and licensing is in place for marketing $350M in digital shares.

Bisnow: How difficult do you find it to convince people to get on board with the tokenization of real estate? Do you encounter pushback?

Nwokedi: I get a lot of pushback. In 2018, I heard “no” all the time, just because no one understood what we were talking about. It was like I was speaking a different language. In 2019, people started to listen because they started hearing what's happening with Bitcoin and cryptocurrencies. And they thought that was on the same level, even though it was not. But they started to at least listen to you, because they could see that there's something emerging on the digital side and the tokenization side.

But 2020, when Covid hit, it was kind of a revelation. Now, all of a sudden, they saw fear, as their assets were kind of going down in value because they were losing occupancy. Banks were moving in, saying they want forbearance and talking about maybe foreclosure. And they had to think of something different in order to maybe get them out of the current situation.

It’s much easier now for me to convince them, because all I have to do is say, there's $2.2 trillion worth of cryptocurrency in circulation right now. There's going to be probably $8 trillion in the next four years. And if you don't grab some of this capital, you're going to be losing capital.

Bisnow: How does Red Swan differentiate itself from other companies in the space?

Nwokedi: We've always been laser-focused on one sector of the market, which is commercial real estate, and institutional-quality properties on commercial real estate. I always wanted to make sure that the type of assets I sold at Cushman & Wakefield were institutional-quality assets that big companies wanted to buy, and small investors were not able to buy. 

I wanted to turn the table on that to make everyone able to afford high-quality assets. That’s how I think we differentiate ourselves — we went after the very attractive properties that only big companies can afford to buy. Small investors like myself can't write a $20M check to buy into that property. But by taking that same property and making it affordable, where a person can invest $10K and have equal share, it's now an opportunity for people to get into.

Bisnow: What goals have you set for the company?

Nwokedi: Our goal is to have, in five years, $60B worth of assets under management. These are tokenized assets that we're now responsible for, and we have closed about $15B worth of capitalization on those assets. That would generate about $700M in revenue for us. We'd be making some profit at that point. 

Initially, just like every other startup, it's about ramping up, building that platform of assets, of customers and content, so that you are bigger than anybody else, and it'd be hard for people to catch up.

Bisnow: Like commercial real estate, the technology sector has a reputation of lacking diversity. What has been your experience as a person of color in the intersection of these two spaces?

Nwokedi: I think we're always underestimated. And even no matter what you did yesterday, what you’re doing today, people underestimate you because sometimes they think you don't have the resources, or the capability to do what you're trying to do. And they wait for somebody that looks different to tell them that yes, this works, and then they will listen to it. So that's been a challenge.

I have learned how to take the business, how to earn the business, how to put the client in a situation where I'm the only one that can provide the solution they need right now. All of a sudden, the color goes away and the need for making money is right in front of them.

There are not many people now who can come and speak my language in terms of tokenization of real estate, so that if I'm talking to an owner, whether he likes me or not, if he wants to do this, I'm one of the only people who he can talk to, to learn from and to utilize. If he waits for his counterpart to do it, he may be two years or even a year behind time.

Bisnow: What are the biggest challenges that you anticipate in the next three to five years?

Nwokedi: Raising capital is a challenge. And hopefully, we're going to secure that soon. But we want to make sure we have enough capital to keep growing, because you have to keep building and building. And it's hard to do that with no money or no salaries to pay everybody. 

As a startup, you're basically providing incentives based on giving stock options, promises, a lot of free time, just leaning on people you know. And that works to a certain extent, because people are always looking for ways to make upside. But then I'll be able to hire staff, they can do certain functions that they're good at. You can scale much faster in every aspect of the business. So I think that'd be the challenge, just keep the financing pipeline going, so that it doesn't stop RedSwan from scaling in the industry.