Harbor's mega dorm security token deal has been scrapped

A giant milestone for the tokenization revolution, almost too good to be true. And it was; Harbor’s token sale of a $20 million mega-dorm has fallen through.

A Harbor spokesperson confirmed with The Block that the deal with the Hub at Columbia was called off. The proposed sale, announced in November 2018, was lauded by both the media and its investors — including heavyweights like Andreessen Horowitz and Pantera — as a beacon of hope for the future of security tokens.

Bidders were told they could buy a small slice of the giant “mega-dorm,” which houses students at the University of South Carolina. Habor’s spokesperson attributed the fallout due to “the issuer [being] unable to come to favorable terms with the existing mortgage lender."

The question now is where this leaves Harbor's security token platform, having lost its flagship sale. A source in the real estate space questioned the logic of Harbor's statement. “Normally these things are finalised before beginning the offering... it doesn't make sense."

The firm said at the time the sale would be divided into 955 tokens, valued at $21,000 apiece. Sources say it’s likely that difficulties reaching this goalpost contributed to the deal being called off.

The dorm is unlike anything you probably lived in during your college years. The 14-story complex offers “world-class amenities,” according to its website. That includes a rooftop pool, a hot tub, and a 2,200 square foot fitness center. 

The news of the Hub at Columbia REIT deal being scrapped comes at a time when token sale platforms across the market have shifted their business models away from servicing investors directly. Harbor recently announced that it would be white-labeling its services for issuers, rather than dealing directly with them.

"The market demand we are seeing is for issuers to have a direct relationship with their investors," CEO Josh Stein told The Block in February. Elsewhere, CoinList, a primary issuance platform, has evolved its own business as well; from making access to the platform free for token buyers to a rather significant remodeling of its raison d'etre.

"We are no longer providing investment advice to the investor. We are merely vetting projects — allowing investors to do their own due diligence," said CoinList CEO Andy Bromberg.

Still, sources close to The Block say these recent changes stem from regulatory pressures from agencies concerned that these platforms are offering broker-dealer related services.

Security tokens came on the scene as the bubble in the initial coin offering market burst. Market observers thought they offered a better alternative to both the unregulated ICO world and traditional Wall Street. 

One of the core advantages of tokenized assets is an increase in liquidity. As The Block previously covered, because of their structure, there are many assets in the market that are illiquid.

Real estate, private equity, and collectibles fall into that group. These assets often are discounted, selling for less than their actual worth: some researchers estimate that these illiquid assets, on average, receive a 20–25% discount to their value. Through tokenization, issuers and investors can immediately benefit from increased liquidity and possibly higher prices.

Sadly, investors who vied to get a slice of Hub at Columbia will have to wait a little longer to realize the wonders of security token tech.