Show notes
Virtual real estate isn't something you can stomp on, but it has become wildly popular among a certain subset of people and investors. Some of these virtual spaces are so desirable, they come with big price tags and are multiplying in value to six-figure amounts. But exactly what is virtual real estate and why should we care. In this episode, Janine Yorio will simplify the idea of virtual real estate and the metaverse where it exists. She'll explain how it all works, who's involved, why people are paying top dollar for virtual properties, and what this all means for our future. (Hint: She claims it'll be intrinsic to our existence as the next step beyond the internet. Janine is the co-president at metaverse innovation and investment platform, Republic Realm. She previously worked as CEO of fintech company Compound, which focused on real estate investing, and was bought by Republic in 2020. She has also worked in private equity for Northstar Capital and in real estate and hotel development at The Standard Hotels. She's a graduate of Yale University. She can be reached at [email protected]. You can also check out new trends in three-dimensional fee simple real estate by joining our network RealWealth, for free, at realwealthshow.com. As a member, you'll have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! TRANSCRIPT [music] [00:00:00] Narrator: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource. [silence] Kathy Fettke: I've got some good news for you here today. If you can't afford to buy real real estate, perhaps you could look into virtual real estate. I'm Kathy Fettke and welcome to the Real Wealth Show. Virtual real estate you ask? Apparently, there's a market for it, and it's an expensive one. Our guest today, Janine Yorio is the co-president at Republic Realm, a metaverse, innovation, and investment platform. She previously worked in private equity for Northstar Capital and in real estate and hotel development at the Standard Hotels. She's a graduate of Yale University, and she's here with us on the Real Wealth Show today. Welcome, Janine. Let's start with what is virtual real estate. I cannot seem to grasp this concept. Janine Yorio: Virtual real estate, at its simplest form, is real estate inside a video game. If you've ever played a video game, depending upon your age, maybe it was Super Mario Brothers, maybe if you're younger, it's Fortnite, there are games and there are spaces inside those games where when you're playing them, your avatar moves around and sees different things. Sometimes there are buildings, there are roads, there might be planets and spaceships, it really depends on the theme of the game. The reason why digital real estate is now something we're even talking about or that you and I are talking about is because the digital real estate inside some games today is built on the blockchain, and as a result, the interest in investing in that real estate has achieved new highs, and people are now much more interested in it than they were when it was just traditional space inside a video game. Companies have been buying advertising inside video games for a long time now. You can go play Madden football or FIFA [00:02:00] World Cup, and there are games on the stadiums inside those sports games. I'm sorry, ads on the stadiums. What's different now is that the games are built on the blockchain, and there's this idea that if you buy things in one game, one piece of real estate in one game, you'll be able to move it around or use it or find utility in other games and that has made people more comfortable with investing much higher dollar amounts in this digital real estate than they had been previously. Kathy: Fascinating. Okay. When people did it before it was blockchain, it was more for fun or for bets? Janine: No, it was the companies that were buying it for advertising. Kathy: For advertising, okay. Janine: Yes, for advertising. Kathy: Now when you say that's with blockchain, I'm starting to understand blockchain, but are they buying a coin? Janine: Kind of. Set aside the blockchain conversation because it's critical to understanding what digital real estate is. That's only the reason why it's become very popular. It has very little to do with what it actually is. Digital real estate is the space inside a video game. Generally, it's the space inside a video game that has no stated objective, meaning you're not there just to kill aliens or capture or somebody else's battleship, you're there to build something. You have the freedom to build whatever you want. You can build your own world, you can build your own house, and owning the real estate inside the game gives you carte blanche to build something that's in your imagination that you can now put in this game that other people can walk around and see. That's what digital real estate is. You can use it for advertising. If you're a company, you can make it a billboard, you can make it a store, you can make it an event space, you can host concerts there, you can sell. Say you're an artist or a creator, you can sell your art or creator through a gallery. There's lots of different things you can do with digital real estate, much the same way you can do with real real estate in the real world. Kathy: Wow. Okay. How do I find it? [00:04:00] Janine: That's where it gets harder and that's where a company like ours starts to add a lot of value. There are hundreds of different games that have a digital real estate component. Many of them have not yet launched yet, so, people oftentimes buy the real estate in the game before the game launches, much the same way that people buy homes in the neighborhood before the neighborhood is developed. So, there are groups, people, companies going in and buying the digital real estate before games launch, and that's where a group like ours is able to act as the intermediary and find those opportunities and bring them to investors, and that's what we do at Republic Realm. We create investment vehicles that allow people, funds, family offices to invest in this category because it can be difficult to access as an individual investor who may not be as familiar with this space. Kathy: You're like a real estate agent for virtual real estate. Janine: We're more like a real estate investment manager. We don't broker the deals, we actually principle the investments. We have investment vehicles where we take in third-party capital and go out and buy those assets and manage them on behalf of our investors. Kathy: Would this be considered a higher-risk investment? Janine: This is an extremely high-risk investment. You shouldn't make an investment like this unless you're comfortable losing all of the money you invest. It's not at all like traditional real estate, which is usually where you park your money, when you've made a lot of it and you want to be sure not to lose it. This is incredibly speculative. It's more speculative, even then some more traditional forms of cryptocurrencies, so, it's not something that you should enter into if you are not very, very comfortable with that risk. Kathy: Are you familiar with eXp, the real estate brokerage that's very much online and somewhat virtual? Janine: Yes. I believe during the pandemic they were hosting meetings and conferences for their employees in these virtual spaces, right? Kathy: [00:06:00] Yes, that's exactly-- That's why I can understand it from that perspective because I am an eXp agent and we're actually growing our brokerage. If anybody's interested, give me a shout-out at [email protected]. But yes, you meet virtually inside this eXp brokerage in this building and there's different rooms you can go into, you can go into a private room, you can be in public. Everybody has their avatar. It's pretty out there. It was a little bit difficult for me to understand, but for younger people like my daughter who spent a lot of time playing. What was the game where you had little people that you were building families and homes? Janine: Minecraft, Roblox? Kathy: Oh, gosh. I can't think of it. She would design, she would just build her family in her house and play house basically, play dolls with it. I'm sure it'll come to me as soon as we're done, but that's basically what eXp is like. At first, I was very confused by it, but as we live in this world now where more and more people were going virtual, we would see more of this kind of thin. Very fascinating, very fascinating. All right. Can you give me some examples of what some people are doing? I know you said some like art galleries, but do you have any specifics? Janine: Sure. We are not only an investor in digital real estate. We're probably the biggest developer of digital real estate in the world. We've developed about seven different projects. The most notable of them is a shopping mall. It's a shopping mall that exists in a metaverse called Decentraland. It's based around a district in Tokyo called Harajuku, which is where Japanese teenagers go by streetwear. We built a shopping center called Metajuku, which has this Japanese, Tokyo theme to it, and it is hosts to digital wearables companies that sell clothing that can be worn by people's avatars in the metaverse. [00:08:00] So, the tenants and the landlord-tenant relationship are structured very similarly to traditional landlord-tenant relationships. There's a lease. There are two components of the lease, a face rent and a percentage rent based on sales volume from those stores. It looks like a regular shopping mall. There are storefronts, there's a promenade where people can walk around. It becomes much easier to understand what digital real estate is when I start talking about things like a virtual shopping mall, it's a place to go and buy things. In this particular situation, you can buy wearables for your avatar in the metaverse, but in other situations, you can go and buy things that would show up at your house in a box, so, it's not always that you're only able to buy digital goods. You can also buy real-world goods, you're just finding out about them while you're spending time in these digital environments. We're also the developer of a master plan community called Fantasy Islands. It's a series of 100 private islands that were built in a metaverse called The Sandbox. They're each architectural unique and designed by real-world architects. They're meant to be ultra-luxury, so, they're definitely the very high-end. There are three different villa varieties, each of which has different traits. They all have a very large dock suitable for having a private yacht and other maritime vessels and vehicles, and they're expensive. We originally sold the first hundred for $15,000. They were priced in cryptocurrency but they equated to $15,000 each, and now they're trading for upwards of $100,000. These are private islands that can only be found in a video game called The Sandbox where you can go there with your avatar, invite your friends, avatars, have parties, do whatever you want there, and generally show everybody that you are successful and that you're smart enough to have gotten in early and buy one of these private islands, so, those are the kinds of projects we're developing and building. [00:10:00] The dollars that are being made doing it are very real. They're not insignificant by any stretch, and that's what makes this so interesting. It's not just a curiosity, it's not something for kids. The dollar amounts that are being deployed in these metaverses are truly enormous. We actually completed the largest metaverse land sale in Decentraland. We spent $900,000 on a parcel of land in Decentraland. The market cap of land in the largest few video games, we call them metaverses, are well over $1 billion. All the land in those video games and you take it and you add it all up, it's valuable. A lot of people understand that value and believe in that value. When properties inside those metaverses trade, they're paying those prices that support that valuation. A lot of times, real-world real estate people will look at me and they're like, "Well, this isn't real." That depends on your definition of real. If real means real money, making real returns, it's very real. If you mean real like you can go touch it, i's not real, then websites aren't real either. Is your website valuable? Do you need a website? Do you need a URL and a domain name? That's not real, but it's certainly valuable. If you can measure the value of digital real estate, based on the number of people that see your space, whether you're a company or a person, then you can start to understand this stuff isn't real in the traditional sense, you can't kick it, but it definitely has value in the sense that it gives you a space that people can see, people from all over the world. They don't have to fly there or walk there. They can see your space from their computer, and I think that's a really powerful sales tool that we're very quickly going to realize every company needs one. Needs a storefront, needs a presence, needs an activation in these metaverses because that's where the next generation of consumers are going to find things. Kathy: It's always hard to wrap your head around new technology. I think you're probably too young to remember what it was like to have the internet enter our world. just like you said, [00:12:00] there were so many people that were late to the game on just creating a website, not understanding-- Janine: Yes. Were like, "You don't need that. You don't need that for anything." Now, real-world companies, of course they have websites, and internet-only companies are starting to open bricks and mortar stores. It's becoming apparent, you have to meet consumers where they are, whether it's online or in-person, you have to be in both places almost equally. I think the metaverse is going to be the third leg on the stool. Our generation is perfectly content to scroll through a 2D website and just scroll down the page looking for things. Today's children who grew up playing immersive video games like Minecraft, like Fortnite, like Roblox, that's not how they interact with technology. They want video because they grew up on YouTube, they want immersive environments because they grew up on Minecraft, they want audio chat with their friends, they want to hear what people are saying while they're doing these things, and that's how they interact with technology. It's not a curiosity, it's already here, it's just not already here for people of our vintage. It's definitely already here for people who are 10 to 16 years old. Those people inevitably will become adults. This is their expectation of technology. I'm here to build it so that it's ready when they start to grow up, and also when other people who are slightly older start waking up to this reality as well. Kathy: I think that will be the quote I take from today is it's not for people of our vintage, that's such a sweet thing to say. [laughter] I love it. Janine: We are of this vintage and we're talking about it today. It's not so difficult to understand that it's beyond. The same way that Facebook is not for the TikTok generation and TikTok is not for the Facebook generation, every generation and their subgroups within that expect different things from their technology and from their own personal tech stack. The metaverse is definitely going to be a part of the tech stack of Gen Alpha, which is that next generation coming up behind Gen Z. Kathy: Gen alpha. Wow. Gosh, I was going to ask something. [00:14:00] I does remind me a lot, I remember the name of the game, The Sims. Janine: Yes, Sims, exactly. It's exactly like that. The Sims were the first of these world builder games, then there was another very popular game in the early 2000s called Second Life, which was focused more on adults. People build stores, they dated, they did all sorts of social connecting activities in this particular metaverse. They didn't use the word metaverse back then, but it was very much like a metaverse. Yes, SimCity was the original predecessor for all of these things. Kathy: Oh, and my daughters were absolutely obsessed with it. I, with my vintage, did not understand it at all, but it was for them like playing house, but being able to actually build it and create it and make it your own. They loved it. Janine: For this generation, some of them spent 18 months in lockdown. For them, the only way they were able to play house with their friends was through these virtual games. While they've been popular for a while, the pandemic just created a completely different shaped growth curve for these types of experiences because children generally need socialization and they had to find it somewhere, and these games filled a void that was left by the pandemic. Even we have too. This social norm of speaking to friends on zoom has gone from edge case to very, very commonplace. We have birthday parties on zoom, we obviously all do meetings on zoom. This idea of expecting your technology, not to be flat and too deep, but to have audio and video and really command your attention is how now we've all had to come up the curve and learn and how to interact with technology too. The idea of us doing it, right now we're doing it on zoom. I'm looking at your house, you're looking at my fake background. In the metaverse, we'd be sitting next to each other at a conference table or at a bar. That's the difference. We'd still be talking, but it would feel even more real because it wouldn't be through this fake [00:16:00] layer, this lens of a computer screen, it would be like we're sitting there next to each other. Kathy: There's must be a psychological component that has been studied very carefully because I've heard that your subconscious really can only take in what the eyes are bringing in but responds to it. That's why we can watch a movie and sweat and be afraid during a murder scene. We know it's not real, it's just a screen on the wall, but we can have all these reactions to it thinking it's real in the moment that we're watching. I had heard that, that the subconscious can't tell the difference. It just takes in what it's taking in. I'm wondering if you're going to one of these islands, if you really feel like you'd be on vacation. Janine: Well yes and no. I think you might feel you're on vacation in the sense that you feel very vindicated for having bought one of these things since they're so rare and your friends are envious. However, the metaverse it's built in is called The Sandbox. The Sandbox is designed to look exactly like Minecraft. If you've ever seen Minecraft, it looks nothing like the Caribbean, it's these square boxes that stack on top of each other, and it's not the slightest bit photo-real. You'll be on a vacation, but in a video game that looks like Minecraft with square palm trees and square people and square everything. Yes, you'll feel like you're on vacation, but there's no intent to kind of suspend reality and make it feel like we're actually there. It looks very different from the real world. Kathy: Oh, okay. Not really like 3D. Janine: It's 3D, but it looks very specific, like a very specific type of video game. Kathy: Fascinating. Well, thank you so much for enlightening us on what our kids will be doing in the future. [laughter] Thank you so much. We'll have all your contact information in the show notes. Janine: Thank you, Kathy. [00:18:00] Kathy: Thank you for joining me here on the Real Wealth Show. If you're looking for hard assets and real real estate, you can get more information at realwealthshow.com. Once you join, it's free. You'll get access to hundreds of free educational webinars that will teach you the ins and outs of real estate investing. Everything from tax deductions to getting the right loans, and also referrals to property teams across the country who have property management in place to make it a turnkey investment. Again, you can check that out at realwealthshow.com. Narrator: The views in opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com. [00:18:57] [END OF AUDIO]