At SteelWave, where I serve as both co-founder and CEO, and also as Executive Chairman, our philosophy has been to invest in commercial properties within burgeoning urban areas that stand at the forefront of blending work with lifestyle—a fusion where our team would choose to reside. The rationale in 2024 revolves around a singular truth: The recruitment and retention battle is now being waged against the comfort of your own living room—if it’s a place we’d be drawn to work in, then it will likely appeal to many others.

SteelWave has experienced the fluctuating fortunes of real estate against a backdrop of technological expansion, economic recessions, and a global financial crisis. Yet, the onset of the global pandemic in 2020 precipitated an overnight revolution in commercial real estate norms. The compulsory shift to remote work persisted post-pandemic, as the workforce showed a reluctance to abandon home comforts for the return to lackluster office spaces.

This shift led to a precipitous decline in urban commercial real estate valuations, a trend that continued despite cities advocating a return to office work. When the Federal Reserve initiated the escalation of previously dormant interest rates, some projected a looming commercial real estate recession. Conversely, we perceived this transformation in the market as an auspicious opportunity.

Our investment efforts have been strategically concentrated on technology hubs, predominantly in California, but also expanding into Colorado, the Pacific Northwest, and Texas. We strive to entice the tech workforce back into the office by providing work environments that are vibrant and welcoming, with reimagined office designs that foster an ambiance where employees are drawn naturally to the worksite. It is critical to acknowledge—that the catalytic synergy that spawns from in-person collaboration amongst creative individuals is the lifeblood of technological growth, a dynamic often lost to remote working.

Our principal clients, tech firms, typically enjoy substantial operating margins with real estate overheads forming a minuscule segment of their overall operational costs. For instance, real estate valuations in central business districts like downtown San Francisco plummeted during the pandemic, resulting in replacement costs that substantially outstripped current rental values. Commodity buildings with minimal amenities and escalating vacancy rates saw valuations drop by as much as 70%, thereby generating some of the most attractive investment prospects seen in several decades.

Considering the substantial nature of our transactions, often in excess of $100 million, sourcing capital to finance these deals presents a formidable challenge, which is further complicated by the dramatic increase in interest rates amidst a backdrop of rising inflation rates. In parallel, my son Mitchell DiRaimondo, who now leads SteelWave Digital and has previously established a trading venture in the cryptocurrency market, recognized that commercial real estate (CRE) assets could serve as collateral for digital investments, melding tangible property assets with actual cash flow within the modern digital financial framework.

He also identified the keen interest of international investors in the U.S. luxury real estate sector, who have historically sought a more efficient mechanism to channel their investments.

Mitchell astutely concluded that investors from financially advanced nations comprehend both the technology and the inherent opportunity, a realization that, paradoxically, U.S.-based capital funds and state pension fund managers have not yet fully embraced.

With this in mind, we identified the potential for cryptocurrency tokens to be invested in next-generation commercial real estate acquisitions, facilitating the introduction of global investment capital into the markets we engage with. As the U.S. trails in establishing a robust regulatory framework for cryptocurrency, we chose to establish SteelWave Digital in Bermuda.

Our engagement with investors from regions such as the Middle East, Singapore, and Israel, leaders within this financial ecosystem, is frequent and enthusiastic. Bermuda’s advanced regulatory framework for digital security, coupled with a tax system that benefits investors, makes it an attractive base for our operations.

We posit that SteelWave Digital now stands as the pioneering large-scale fund offering digital investment flexibility.

Our investment ‘products’ are commercial buildings with long-term leases to tech giants such as Apple and Google—assets that generate solid cash flow, necessitate no further retrofitting, and frequently feature a renowned tenant. By investing in digital currencies, stakeholders acquire remarkably stable cash flows, thereby mitigating the intrinsic volatility of digital currency investments, while simultaneously injecting crucial capital into the economy.

We foresee green signals at this crossroads of investment.

Our blueprint moving forward is to secure between 15 to 20 of these premium properties at significantly reduced prices, offering investors the option to begin with either a digital security or a traditionally limited partnership stake. Initial limited partnership investors will be accorded the option to transition their investment into digital security at a future juncture when the digital ecosystem is primed to support a robust, secure, and liquid secondary market.

Post-conversion, digital securities offer the advantage of peer-to-peer transactions or listings on regulated exchanges.

This represents a clear-cut investment strategy in commercial real estate, enveloped in an innovative digital ownership model that provides global institutional investors, with boundless optionality—the opportunity to engage in the inexorable digital revolution.

Adhering to the principle of initiating significant investments—ranging from $1 million to $50 million—we create the foundational stones required for the model’s triumph. Subsequently, we intend to broaden the investor base through secondary trades of the primary issuances.

Our model boasts lower fees and provides more accessible entry and exit points, hence enhanced liquidity, in stark contrast to large real estate investment trusts, and is devoid of the biases and inefficiencies that plague REIT investments.

Nevertheless, the pathway for cryptocurrency in the U.S. commercial real estate market is laden with challenges that must be navigated before it can be firmly established as a fundamental component of the CRE financing infrastructure.

There is an imperative need for the U.S. to reform or institute new tax, entity, and structural laws that accommodate the unique nature of digital asset ownership in real estate, facilitating seamless trading. A failure to meet this demand and to construct a suitable framework for cryptocurrency could have grave consequences for the American economy if not promptly addressed.

By democratizing investment in commercial real estate, we expand the pool of stakeholders invested in sustaining property values and ensuring the flow of capital for further investment.

Hence, we advocate that a pivotal avenue for success in the commercial real estate arena of 2024 lies within the digital 3.0 ecosystem—an avenue that is too significant to overlook.