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Real estate investor Grant Cardone is expanding his multifamily housing fund strategy that pairs traditional commercial property with Bitcoin allocations, offering a hybrid approach to real estate and digital asset exposure.
The company recently launched its fifth commercial multifamily investment property, a 366-unit multifamily housing complex that was purchased for approximately $235 million, with $100 million in Bitcoin (BTC) added to the fund, Cardone told Cointelegraph.
Real estate’s low volatility, tax benefits, income generation and stable value combined with Bitcoin’s high volatility gives the fund the best of both worlds, allowing it to channel rental income into more BTC purchases, Cardone said. He added:
“The objective is to take that public vehicle and turn it into shares. We believe that real estate and bitcoin combined as a stock, commercial as a public company, is like treasuries of digital assets. But we have a real product, a real asset, real income, real tenants, real customers. We have a free cash flow.”
“This property will make $10 million worth of net operating income per year that we can use to buy more Bitcoin,” he said.
This combination could allow the incorporation of new strategies in real estate investment trusts (REITs), portfolios of physical properties listed on the stock exchange that provide investors with passive exposure to real estate.
Related: Metaplanet’s Bitcoin Earnings Plunge 39% As October Crash Pressures Corporate Treasurers
Crypto treasuries without operational activity pose structural vulnerabilities
Most crypto-treasury companies raise funds by issuing corporate debt and equity to finance purchases, but do not have an operating business that generates cash flow.
“If the company is only bitcoin, why should I invest in that company? Real estate is the best treasury company that you can build because it is not a product that is discretionary – you have to buy housing,” said Cardone.
The lack of operating companies is a reason only a a host of treasury companies will survive the next decline of the crypto market, according to the venture capital company Breed.
Treasury company experienced a large setback in September as the multiple on the net asset value (mNAV), or before the price above the total assets of the assets of a company, collapsed.
When mNAV is above one, these treasury companies can lend more funds to finance purchases, but when mNAV contracts to 1 or less, access to financing dries up.
This can lead to a situation in which overleveraged companies, unable to meet their debt service costs, are either forced to divert their cryptocurrencies on the market to pay the debt – further reducing asset prices – or declare bankruptcy.
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