Early bitcoiner Jered Kenna can't believe that forgettable digital artifacts – “a YouTube video or a picture or whatever” – have sold for millions in this year's frothy market for non-fungible tokens (NFTs). He is now auctioning an NFT with a little more “meat” from a market just as crazy: San Francisco housing.
Kenna is selling the rights to a 75-year lease in his 20Mission co-living space as an NFT. Whoever wins the auction will pay $1 a month and no utility fees in a 41-unit building in the Mission District, where tenants regularly pay up to $2,200 in monthly rent, he said.
The effort is an example of NFTs potentially transcending the world of digital tchotchkes for more “real-world” use cases.
“Now, if somebody wants to pay a million for it, I don't think that's unreasonable,” Kenna said, arguing NFT-linked leases offer advantages in liquidity and transferability. “I think there's some serious value here, but not because it's an NFT.”
Kenna said NFTs could give tenants more opportunities to transfer their leases. Furthermore, the technology allows him to perpetually collect a slice of secondary deals. He said he placed the baked-in smart contract royalty at 1%.
“One percent on a property transfer is nothing. I mean people are putting 10%, 20% royalties on a picture,” he said.
When asked for comment, McKenna Brink Signorotti LLP, a California real estate law firm and counsel to 20Mission, said: "By tokenizing physical, non-virtual real estate, the real estate landscape we have come to know will be revolutionized."
Whether prospective tenants find a 75-year NFT lease reasonable at any price will soon become apparent: Bidding begins next week on the OpenSea marketplace.
There’s no direct precedent for such a rental arrangement, although at least one real estate broker who tried to sell his house on OpenSea earlier this month completely whiffed. He didn’t garner a single bid, according to CNN.