This article by Alex Moskov was originally published at Coincentral.com
When it comes to commercial real estate, many often find themselves locked outside an esoteric community and forced to deal with imperfect information in a constantly changing landscape.
Baya is offering an open exchange platform for commercial real estate information that showcases everything from properties, availabilities, leases, and transactions. It utilizes blockchain to record and validate data from landlords, tenants, and brokerages and helps these parties monetize their data.
Jason Freedman is a team member at Baya and is the founder of 42Floors, a top commercial real estate data company. Jason has over two decades of experience as an entrepreneur with two venture-backed exits.
Baya aims to disrupt the commercial leasing environment. Can you tell us what problems exist there currently and what made you decide to zero-in on this space?
Commercial real estate is an interesting study in the hidden pains of high transaction costs. Tenants that want to lease an office. The brokers that represent them, and the landlords that want to have their vacancy filled all want a deal to occur as efficiently as possible, and each of them has various data needs to get the deal done. The problem is that this data lies within so many different organizations that the industry suffers from a classic prisoner’s dilemma: Everyone would be better off if everyone shared, but no one wants to share their own portion alone.
Right now it costs approximately 2% of a lease value to inquire and validate all the information necessary to get a lease signed. That 2% has pain for the landlord if they have extra vacancy time due to the high friction of the transaction process that is paid on the tenant’s side with months of searching. That is a pain on the broker’s side, expending months instead of days getting a single deal closed before they get paid their commission. One of the many benefits of blockchain is that allows disparate entities to trust each other without relying on a centralized platform. That’s why we’re building Baya. We are creating a medium in which landlords, tenants, brokers, and data companies can trust each other and work together towards a more efficient commercial real estate process.
What’s the single biggest opportunity for you as a business in commercial leasing?
The biggest opportunity itself is that Baya can be a commercial real estate data platform with applications and even new industries built right on top of it. Here’s a simple example of each. Brokerages would love to have custom applications that allow their brokers to serve their clients better. Baya provides them the data necessary to build leasing tour books, pricing calculators, portfolio analysis tools, all items they’ve dreamed of the building but don’t have access to the full market’s worth of data that would make such a tool valuable.
With a blockchain-powered co-op model, you also have the ability to spawn new industries themselves. Investing in commercial real estate today is a hyperlocal industry where you have to work through people on the ground who know the buildings themselves, which is strange for a multi-trillion dollar asset class. Building a trustworthy source of data will enable new financial products to be built for a worldwide investor class that wants to invest in commercial real estate without having to have an on the ground relationship.
Virtually every other investment class has developed this underlying trustable data source from stock markets, to bonds, to residential real estate. Commercial real estate is fairly unique in not yet having a worldwide arm’s length investment industry. Baya aims to make an exhaustive trustworthy dataset available that can power that growth.
What benefits do you plan to pass on to your customers?
Baya’s a co-op that accepts data from landlords, tenants, brokerages, and other technology companies. It records on the blockchain who contributed which piece of data, validates it, and then sells it back to the industry. The contributors of the data will often be the customers. They’ll receive credit when they quickly and correctly contribute valuable data, and they’ll be able to spend that credit on the additional data that they need to run their business or, of course, transform it in any other currency they want. For some, Baya will be a data source that allows them to run their business more efficiently and for others, Baya will be a revenue source that allows them to monetize the work they’re already doing.
Apple’s Steve Wozniak has been all over the press for finally coming on board with a blockchain company tokenizing real estate. Are there any parallels between this business and what you’re planning to do?
Real estate is a really large asset class that suffers from the high transaction costs of multiple parties not trusting each other in many different facets of the real estate sectors. The problem they’re tackling is an important one on the other side of the industry but not a direct relation to Baya’s commercial real estate data marketplace.
What challenges lie ahead in terms of legislation, licenses, and the legality of smart contracts? For example, will your contracts hold up in a court of law?
Baya today is a data marketplace and our smart contracts are attribution for who contributed data when, whether it was correct, and how valuable that data is. It’s not currently replacing a lease title or transaction document. In time, Baya will work on those problems or work with any other solution that assists in reducing transaction costs for the industry.
Many may argue that the technology is simply not there yet to offer a safe service through smart contracts. How do you feel about that? When do you think it will be functional and what steps are you taking to ensure the robustness of your smart contracts?
I don’t think this is applicable to Baya’s data marketplace. The smart contracts we utilize for attribution are fairly simple and quite robust already. Baya’s an example of a blockchain project that is ready for production almost immediately and doesn’t need to wait for the infrastructure of the blockchain community to develop further.
What plan do you have in place for contract disputes?
Our version of contract disputes in Baya’s marketplace of data is not as challenging as those that are, say, tokenizing a real estate transaction that has an opportunity for quite nuanced contract dispute resolution. We are very simply giving credit to those who’ve contributed valuable data first. Now, when the data contributed itself is in dispute we run a verification process that checks the real-world status of the information.
For instance, if a broker misrepresents a listing as their exclusive representation when, in fact, in the offline world it is represented by a different broker, we have a process submitting a landlord’s confirmation of exclusive representation by a specific broker. That verification process has a cost that then must be covered by the original contributor of the falsified data, as well as a penalty that remains in place for a contributor to falsify data in the future. The incentive structure of Baya is quite generous to those that contribute correct data and quickly reverses on those that have a pattern of submitting false data.
Your lite paper doesn’t mention a native token in your business model. Are you planning not to use your own currency for transactions or stay with USD, BTC, and ETH?
We’re exploring a couple of options here, and it withheld publishing the final decision until we’re sure we have it right. Some blockchain projects are very quick to announce their plans, issue a token, and fundraise through an ICO. We’ve been doing the opposite. We’re very focused on building a cooperative coalition with the top names in commercial real estate and helping them all understand the value of working together.
In the commercial real estate industry, the hard part is getting all the big players to work together. The easier part is the actual building of blockchain technology. I think the commercial real estate industry and blockchain community will both be impressed with the progress we’ve made on the industry and data side, and only then will we want to address the specific token issue.
You have yet to release your whitepaper. What are you currently working on, how far advanced is the platform, and what’s next on the list?
Our timeline for the release of the white paper is this quarter, which we’re on track for. We have some pretty big announcements to make in a line with the white paper released in terms of the quantity of data we now have on the platform, the industry partners that have come together, as well as how we will store the data and incentivize contribution and usage.
Tell us a little about the team. What got them interested in pursuing this endeavor?
The team has grown substantially since the release of the white paper. They include commercial real estate data engineers that came over from 42Floors, blockchain engineers that have worked on some of the top blockchain products over the last couple years, and a group of advisors that are industry elders representing both the large institutions that they manage, as well as a group of leaders committed to a better industry. You can read more about each of them on Baya.io.
Can you sum up with your elevator pitch?
Baya is an open exchange of commercial real estate information. Properties, availabilities, leases, and transactions. Using blockchain technology and a verification marketplace, Baya will be the single source of truth for commercial real estate information.
Anything else you would like our readers to know?
Thanks to all of you.
Thanks to you, too!