Metaverse Real Estate Companies Are Here
A look inside some of the early movers...who are profiting big time
Hi readers, welcome to Part 3 of my series on virtual real estate. Feel free to check out Part 1 and Part 2 if you haven’t already.
Today I want to bring attention to the entrepreneurial real estate companies that have launched head-first into the metaverse and the world of virtual real estate. Real estate developers, fund managers, property managers, architects and real estate agents will all have roles to play in the evolution of the metaverse.
For those daring enough to be a relatively early mover, this could prove to be highly lucrative. In early December, Rendezvous Equity, a metaverse and digital asset investment fund, sold a 6x6 plot (36 land parcels) in The Sandbox, adjacent to rapper Snoop Dogg’s 12x12 estate, for US$710,000. They had purchased the property only 2 weeks earlier for US$200,000 – all up a tidy $500,000 profit! The buyer, Exclusible, is a premium e-retailer for digital collectable assets in the luxury sector, who clearly thought that the proximity to such a culturally significant celebrity justified the steep premium. Exclusible have plans to create a fashion district or “Dubai Mall” within the metaverse, where brands could open concept stores or organise events.
Metaverse Group
The Metaverse Group is a self-described “vertically integrated real estate company for the metaverse economy”, based in Toronto, with a virtual global HQ in the metaverse Decentraland. Its services include buying and selling virtual real estate across different metaverses, developing virtual land and property management, as well as marketing and promotional services. Metaverse Group have real estate investments across the metaverses Decentraland, The Sandbox, Somnium, Cryptovoxels and Upland.
The group has been behind some of the largest virtual real estate deals in the metaverse to date, including a US$2.43 million purchase of a 116-parcel estate in the fashion district of Decentraland. The group’s plan is to develop the parcel of land to partner with brands and facilitate fashion projects and events. With brands like Gucci, Burberry, Louis Vuitton and Nike all entering the metaverse, it certainly sounds like there are strong tailwinds to support this venture.
Tokens.com, a publicly traded company that invests in a variety of cryptocurrency assets, bought a 50% stake in the Metaverse Group for ~US$1.7 million in October 2021, before upping to a 70% holding for an additional ~US$2.7 million in November. Tokens.com is busy constructing the Tokens.com Tower in Decentraland’s Crypto Valley, which is due for completion in early 2022. The tower is intended to be used to host conferences and events, and will also rent out virtual spaces to other companies, with a number of prospective tenants said to have expressed interest.
The founders behind Metaverse Group are extremely bullish on virtual real estate, with co-founder Michael Gord suggesting that there is potential for a 200x within the next 16 months. This figure is, of course, his opinion, and undoubtedly driven by sentiments alluded to in his comment “Imagine if you came to New York when it was farmland, and you had the option to get a block of Soho”. Food for thought…
Republic Realm
Republic Realm is another highly active and well known virtual real estate investor and developer. The company is most famous for its US$4.3 million virtual land acquisition in The Sandbox, the most expensive metaverse property sale to date. The property was purchased from video game company Atari, who Republic Realm plan to partner with to develop virtual real estate in The Sandbox.
Per the company website, Republic Realm has holdings in over 23 metaverse platforms and owns over 2,700 NFTs, and is said to own over 2,500 plots of land across the metaverse. Real estate projects they have developed include the first metaverse shopping mall with tenants and leases, a master-planned luxury real estate community, and an online university set in the metaverse.
Republic Realm were also the vendors behind the yacht that was recently auctioned off for US$650,000 in The Sandbox (after a six day bidding war). The yacht is a part of the company’s project ‘The Fantasy Collection’, which is a suite of luxury NFTs such as speedboats and jetskis, intended to complement its development of Fantasy Islands, a master-planned community comprising over 100 private islands.
Notably, Republic Realm are in the market for capital (see here), seeking to raise up to US$75 million. The capital raise currently has over US$56.9 million in reservations, and the associated documentation provides some strong insights into their portfolio and investment strategy.
The company’s strategy rests on three pillars:
1. Long-term hold
2. Development
3. Strategic partnerships
The company often holds land parcels with the intention of benefiting from capital appreciation, and will develop select land parcels using an in-house design and development team (such as the projects discussed earlier).
Its development principles are focussed on placemaking, urban planning and value creation. Co-founder Janine Yorio has indicated the she believes that in a virtual world where users can teleport to different locations, “ingenuity and design” are considerably more important than just location. She views the skill in development as being able to bring humanity and life to virtual landscapes, so as to draw users in and generate interaction.
As of November 2, 2021, Republic Realm's return on invested capital since inception was 145.26%. It had invested over US$11 million into metaverse assets. On a cost basis, the company had invested $1,236,809 into land parcels on The Sandbox, with the then current value listed at $5,189,423, giving a return on investment of 319.58%. Considering that metaverse platforms absolutely skyrocketed in November, I have no doubt the return is now considerably higher. It will be very interesting to see where these figures are when they provide an updated share price ahead of their offering.
Voxel Architects
Virtual architects have a huge opportunity to become key drivers behind placemaking in the metaverse. Voxel Architects, per a recent Fortune article, make up to US$300,000 per project and have designed over 40 virtual buildings in the past year. Notable clients have included Sotheby’s, ConsenSys Software and crypto company Metamask, who are all busy developing buildings within the metaverse. Voxel was the driving force behind Sotheby’s first-ever virtual gallery in Decentraland, which is a replica of its New Bond Street Galleries in London.
Per George Bileca, chief design officer at Voxel, “You kind of have to combine what you know about architecture, and what you know about gaming, and create something new”. Like a traditional architectural firm, Voxel receives requests for design quotes from clients. After agreeing on a price and initial design, they finalise the design and send it to a 3D modeler who then builds the design in the metaverse, on a land parcel owned by the client. The average project takes about a month from initial concept through to launch, although larger projects can take longer.
While Voxel estimates that there are more than 20 design businesses already competing for projects, it is looking to double its headcount to meet demand. Voxel’s team has grown to 20+ people, including 3 architects, 12 3D modelers and one concept artist. The company receives over 30 requests for design quotes per week, and project prices range anywhere from US$10,000 to US$300,000. It certainly seems like a cashflow positive business!
The Alexander Team
Real estate agents could serve an important role connecting buyers and sellers for high-value metaverse projects, while leasing agents with extensive networks could do well finding tenants for metaverse properties.
Oren and Tal Alexander, well-known luxury real estate agents at Douglass Elliman (one of the largest real estate agencies in North America) recently announced a partnership with Republic Realm to bring new customers into the metaverse. The brothers intend to focus on trophy properties within metaverses and the move is said to be inspired by client interest in the market. It’s early days, but a move from well-known real estate agents into the metaverse only adds an additional level of credibility and could certainly bring in new customers over time.
The Roundup
Clearly there are a multitude of opportunities for real estate-oriented companies to pursue in the world of virtual real estate. Should the metaverse grow into a multi-trillion dollar industry in the coming years, I’d no doubt expect that today’s traditional REITs and real estate funds could soon be establishing teams focussed entirely on virtual real estate. I’d certainly expect market-savvy clients to be demanding exposure to such a high-growth asset class if trends continue!
As for where we currently sit? I for one would certainly have enjoyed picking up some prime Manhattan real etate in the 1700s! Of course, none of what we have discussed is financial advice, but it certainly makes you think…
About the author
Raphael is a young property investment professional at AMP Capital. He has had previous experience in healthcare investment, investment banking and boutique private equity. Outside of work he loves all things investing, a good crypto call, poker, basketball, getting outdoors and keeping fit.
Connect on twitter @raphaelsebban1