SteelWave Digital Eyes The UAE At The Forefront of The Crypto-Commercial Real Estate Revolution

UAE Business Magazine:

Tell us about your background and what brought you to lead SteelWave Digital?

Mitchell DiRaimondo:

I was a crypto native back in 2014 when I was in high school. I saw it as an investable asset class at that time, but the biggest issue was controlling the risk, which meant controlling the volatility.

I went to college and founded a hedge fund while there, one that traded in volatility. From 2017-2020 we saw the good, the bad, the ugly, the ups, the downs. We traded it all, and in doing that we realized that the space lacked something tangible – real-world, scalable assets backed by hard assets that can be underwritten.

Call it art, call it real estate, whatever it might be – There wasn’t anything of scale in the space that an institutional investor could run a due diligence package on.

The thought of bringing institutional real estate to the space was very intriguing to me. Merging a very old asset class with a new financial ecosystem and being a first mover in the space was something that really caught my attention.

 So I went to my father, the CEO of SteelWave, when I graduated and I suggested that SteelWave could be a first mover in this new ecosystem and build a brand in a completely new pool of capital to capitalize on its real estate pipeline.

That was the genesis. SteelWave creates very cool and experiential environments where people want to live, work, and play. They’ve been doing it on an institutional level for almost 5 decades.

So it was a perfect storm; the perfect timing for everything to come together.

UAE Business Magazine:

Could you expand a little bit on where you see the opportunity and also the future of the intersection of commercial real estate (CRE) and tokenization?

Mitchell DiRaimondo:

We view the blockchain as a hyper-efficient data management platform and we view tokenization as an equally efficient asset ownership platform. We tend to favor the notion of digital security as opposed to tokens…it sounds a bit more polished in certain circles. In the real estate world, asset ownership is typically encumbered by ownership structures that are generally illiquid and inefficient. Tokenization can alleviate this illiquidity. However, for tokenization to provide liquidity you need a very vibrant marketplace that has lots of buyers and sellers.

In order to do that of scale you need a marketplace that has been adopted by institutional investors as opposed to just retail investors. In order for institutional investors to become primary players in this ecosystem you need to solve the issues surrounding a murky regulatory environment, reporting/compliance, and custody. Regulation, compliance, and safekeeping are all elements of institutional investment in the traditional financial system that most players take for granted. That’s not necessarily the case for the 3.0 financial ecosystem. Things are moving in the right direction but it takes time and there are a lot of stakeholders that need to be in agreement.

Tokenization will become a means for secondary liquidity of real-world assets well before it becomes a means for primary liquidity.

On the CRE side of things, the effects of Covid and the intensive Fed-driven interest rate hikes have led to a significant capital market dislocation. Values have plummeted from 18 mos ago across most real estate sectors in the US. This has led to a buying opportunity that might rival what real estate veterans saw during the RTC days in the early 90’s. We have seen a lot of interest in the Middle East and Asia to diversify out of their local markets and participate in the US buying opportunity.

 Likewise, many of these same investors have a much better understanding of the potential future benefits of this concept of ‘fractionalization’ of ownership and the world of digital securities. They are much more open-minded about this type of ownership wrapper than most US institutional investors and the regulatory systems in many of these countries are equally more progressive in this direction than currently in the US.

 As you see more capital allocated to the crypto markets and the resulting run-up in crypto values, many of the early investors are seeking avenues to diversify out of a portion of their holdings into risk-off, hard asset-backed investment opportunities.

 Again – It is the perfect storm that we’re stepping into, and doing so by design.

 UAE Business Magazine:

You mentioned the opportunity to expand into the Middle East and given the fact that SteelWave will participate in the CryptoVSummit 2024 in Dubai, what advantages for the future do you think this participation will bring?

Mitchell DiRaimonndo:

Exposure. SteelWave is very well known in our US markets and within the US institutional investor community because of our long track record. We are less well known by the Middle Eastern investment community and the 3.0 community. We are trying to build our brand within this 3.0 space and we believe that this space has matured quicker in the Middle East than it has in the US and that it’s a bit more broadly adopted by Middle Eastern institutional investors.

Many Middle Eastern investors really get the potential benefits of this new financial ecosystem. Their US counterparts are lagging behind as opposed to leading the charge. If I start talking about ERC20’s and smart contracts to most US institutional investors, I get nothing but a blank stare.

I do think that others are starting to think like we started thinking 2-3 years ago. It has taken us some time to work through the regulatory and foreign investor tax challenges. That is now in the rearview mirror. We domiciled the investment vehicle in Bermuda as part of that equation and we are stepping on the fundraising gas pedal.

We’re very excited to kind of have that summit be our launch point and to bring it to the public and be like, hey, this is an all-new vehicle.

 And we’re here to stay.

UAE Business Magazine:

Aside from the obvious and what we can see on paper, what is the most unique trait that SteelWave has, and what separates SteelWave from other similar commercial real estate (CRE) entities for background on those interested in the Digital Investment Vehicle’s launch?

Mitchell DiRaimonndo:

We are a very design-forward creator of commercial real estate. We create environments where people really want to spend time and soak up the experience. We don’t view real estate through some utilitarian lens. We believe that real estate needs to be experiential.  We’ve been doing the same thing for a very long time. The other thing that separates us from others is that we’ve been doing it as a TEAM for a very long time. The longevity at SteelWave is unique. The average tenure working at SteelWave is 17 years for the senior 35 team members. People come to SteelWave to build a career as opposed to taking a job.

Likewise, we are very forward-thinking about capital, product types, and consumer trends. We were one of the first players in the Life Science space well before Life Science was considered a vertical. Today, we are a leader in Life Science. We were one of the pioneers in the notion of a creative office whereby we create work environments that foster collaboration and teamwork for the innovation workforce. We want to do the same thing in the context of the 3.0 digital ecosystem with regard to commercial real estate. We are excited to be a vehicle to bridge the next generation of capital into a very traditional space.

We see these markets as starving for it and for us, to be a part of that is an exciting opportunity.

UAE Business Magazine:

Where do you see SteelWave Digital five years from now?

Mitchell DiRaimonndo:

I think at its core, what SteelWave does hasn’t changed for 40 years. Our real estate ethos has been refined over time to meet the needs of our customer base but the underlying philosophy has remained unchanged. How we have capitalized our activities has definitely changed over the history of the company. SteelWave Digital is the next chapter in this capital movement. We don’t expect this next generation to replace the traditional world of capital; however, we do expect it to augment it in significant ways. The two worlds don’t need to be mutually exclusive. There are a lot of ways that the 3.0 next-generation capital world can play alongside or inside traditional capital stacks.

 Our goal in 5 years, is to be one of the leading groups of this next generation of capital, supplying very cool real-world assets to this decentralized financial market. We expect to be the gold standard for what real estate investing means in the digital space, that’s a goal for us.

 I like the concept of democratizing finance and making it so that anyone can invest in any opportunity. We are a private company, so in the past, that has not been the case for us. Our minimums have been extremely high and we tend to deal with large institutional investors.

Five years from now, as the market grows, you’re going to start to see retail investors move from a secondary liquidity position to a primary liquidity position through pooled capital bundles. This will allow people from all walks of life to participate in the ownership of a tangible asset class and large individual assets within that class that’s simply not possible with traditional ownership structures today.

That’s what excites me the most about SteelWave Digital and the future.

@SteelWaveLLC